[Federal Register Volume 61, Number 121 (Friday, June 21, 1996)]
[Notices]
[Pages 31958-31962]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15876]
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DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 96-46; Exemption Application No. D-
09844, et al.]
Grant of Individual Exemptions; Jacor Communications Inc.
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.
[[Page 31959]]
Jacor Communications Inc. Retirement Plan (the Plan), Located in
Cincinnati, Ohio
[Prohibited Transaction Exemption 96-46; Exemption Application No. D-
09844]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (b)(2) and
407(a) 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 (1) the past receipt by the Plan of
certain stock-purchase warrants (the Warrants) pursuant to the
restructuring of Jacor Communications, Inc. (Jacor), excluding that
portion of Warrants which was acquired by the Plan's Qualified Matching
Contribution Account (the QMCA); (2) the past and future holding of the
Warrants by the Plan; and (3) the disposition or exercise of the
Warrants by the Plan; provided that the following conditions are
satisfied:
(A) With respect to all participant accounts other than the QMCA,
the Warrants were acquired pursuant to Plan provisions for
individually-directed investment of such accounts;
(B) The Plan's receipt and holding of the Warrants occurred in
connection with the restructuring of Jacor and the Warrants were made
available to all shareholders of common stock of Jacor;
(C) The Plan's receipt and holding of the Warrants resulted from an
independent act of Jacor as a corporate entity, and all holders of the
common stock of Jacor, including the Plan, were treated in the same
manner with respect to the restructuring of Jacor; and
(D) With respect to Warrants allocated to the QMCA, the authority
for all decisions regarding the holding, disposition or exercise of the
Warrants by the Plan will be exercised by an independent fiduciary
acting on behalf of the Plan, to the extent that such decisions have
not been passed through to Plan participants; and
(E) With respect to all other accounts, the decisions regarding the
holding, disposition or exercise of the Warrants have been, and will
continue to be made in accordance with Plan provisions for
individually-directed investment of participant accounts, by the
individual Plan participants whose accounts in the Plan received
Warrants in connection with the restructuring.
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 April 25, 1996 at 61 FR
18421.
EFFECTIVE DATE: This exemption is effective as of January 11, 1993,
except with respect to the Warrants held by the QMCA. With respect to
those Warrants, the exemption is effective July 26, 1995.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
EAI Partners, L.P. (EAI), Located in Norwalk, CT
[Prohibited Transaction Exemption 96-47; Exemption Application No. D-
10147]
Exemption
Section I. Exemption for the In-Kind Transfer of Assets
The restrictions of sections 406(a) and 406(b) 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 (F) of the Code, shall not
apply, as of December 29, 1995, to the in-kind transfer of assets of
employee benefit plans that are participant-directed account plans
intended to satisfy section 404(c) of the Act and as to which EAI
serves as a fiduciary (the Client Plans), including a plan established
by EAI (the EAI Plan), as well as two plans that are sponsored by
affiliates of EAI, namely, the Harding Service Corporation et al.
Profit Sharing Plan and Trust (the Harding Plan) and the Stockwood VII,
Inc. 401(k) Plan (the Stockwood Plan),* that are held in the Small
Managers Equity Fund Trust (SMEF) maintained by EAI in exchange for
shares of the EAI Select Managers Equity Fund (the Fund), an open-end
investment company registered under the Investment Company Act of 1940
(the '40 Act) for which Evaluation Associates Capital Markets, Inc.
(EACM), a wholly owned subsidiary of EAI, acts as investment adviser,
in connection with the partial termination of SMEF.
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\*\ The Client Plans, the EAI Plan, the Harding Plan and the
Stockwood Plan are collectively referred to herein as the Plans. In
addition, the EAI Plan, the Harding Plan and the Stockwood Plan are
collectively referred to herein as the Related Plans.
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This exemption is subject to the following conditions:
(a) No sales commissions or other fees, including any fees payable
pursuant to Rule 12b-1 of the '40 Act, are paid by a Plan in connection
with the purchase of Fund shares through the in-kind transfer of SMEF
assets.
(b) All of the assets of a Plan that are held in SMEF are
contributed by such Plan in-kind to the Fund in exchange for shares of
such Fund. A Plan not electing to invest in the Fund receives a
distribution of its allocable share of the assets of SMEF either in
cash or in-kind.
(c) Each Plan receives shares of the Fund which have a total net
asset value that is equal in value to such Plan's allocable share of
the assets of SMEF as determined in a single valuation performed in the
same manner at the close of the same business day, using independent
sources in accordance with the procedures set forth in Rule 17a-7(b)
(Rule 17a-7) under the '40 Act, as amended, and the procedures
established by the Fund pursuant to Rule 17a-7 for the valuation of
such assets. Such procedures must require that all securities for which
a current market price cannot be obtained by reference to the last sale
price for transactions reported on a recognized securities exchange or
NASDAQ be valued based on an average of the highest current independent
bid and lowest current independent offer, as of the close of business
on the Friday preceding the weekend of the in-kind contribution of SMEF
assets to the Fund, determined on the basis of reasonable inquiry from
at least three sources that are broker-dealers or pricing services
independent of EAI.
(d) On behalf of each Plan, a second fiduciary who is independent
of and unrelated to EAI (the Second Fiduciary) receives advance written
notice of the in-kind transfer of assets of SMEF to the Fund and full
written disclosure, which includes, but is not limited to, the
following information concerning the Fund:
(1) A current prospectus for the Fund in which a Plan is
considering investing.
(2) A statement describing the fees for investment advisory or
similar services that are to be paid by the Fund to EACM; the fees
retained by EACM for secondary services (the Secondary Services), as
defined in paragraph g of Section II below; and all other fees to be
charged to or paid by the Plan and by such Fund to EAI, EACM or to
unrelated parties, including the nature and extent of any differential
between the rates of the fees.
(3) The reasons why EAI considers such investment to be appropriate
for the Plan.
(4) Upon request of the Second Fiduciary, copies of the proposed
and final exemptions relating to the transaction described herein.
(e) On the basis of the foregoing information, the Second Fiduciary
authorizes in writing the in-kind transfer of a Plan's assets invested
in SMEF to the Fund, in exchange for shares of the Fund, and the fees
received by EACM in connection with
[[Page 31960]]
its investment advisory services to the Fund. Such authorization by the
Second Fiduciary will be consistent with the responsbilities,
obligations and duties imposed on fiduciaries under Part 4 of Title I
of the Act.
(f) EAI sends by regular mail to the Second Fiduciary of each
affected Plan, the following information:
(1) Not later than 30 days after the completion of the in-kind
transfer transaction, a written confirmation which contains--
(A) The identity of each security that was valued for purposes of
the transaction in accordance with Rule 17a-7(b)(4) of the '40 Act;
(B) The price of each such security involved in the transaction;
and
(C) The identity of each pricing service or market maker consulted
in determining the value of such securities.
(2) Within 90 days after the completion of each transfer, a written
confirmation which contains--
(A) The number of SMEF units held by the Plan immediately before
the transfer, the related per unit value and the total dollar amount of
such SMEF units; and
(B) The number of shares in the Fund that are held by the Plan
following the transfer, the related per share net asset value and the
total dollar amount of such shares.
(g) On an ongoing basis, EAI provides a Plan investing in the Fund
with--
(1) A copy of an updated prospectus of such Fund, at least
annually; and
(2) Upon request, a report or statement (which may take the form of
the most recent financial report, the current statement of additional
information, or some other written statement) containing a description
of all fees paid by the Fund to EAI and its affiliates.
(h) As to each Plan, the combined total of all fees received by EAI
and/or its affiliates for the provision of services to the Plan, and in
connection with the provision of services to the Fund in which the Plan
invests, is not in excess of ``reasonable compensation'' within the
meaning of section 408(b)(2) of the Act.
(i) All dealings between a Plan and the Fund are on a basis no less
favorable to the Plan than dealings between the Fund and other
shareholders.
(j) EAI maintains for a period of six years the records necessary
to enable the persons described below in paragraph (k) to determine
whether the conditions of this 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 EAI, the records are lost or
destroyed prior to the end of the six year period, and (2) no party in
interest other than EAI, shall be subject to the civil penalty that may
be assessed under section 502(i) of the Act or to the taxes imposed by
section 4975(a) and (b) of the Code if the records are not maintained
or are not available for examination as required by paragraph (k) of
this Section II; and
(k)(1) Except as provided in paragraph (k)(2) and notwithstanding
any provisions of section 504(a)(2) and (b) of the Act, the records
referred to in paragraph (j) are unconditionally available at their
customary location for examination during normal business hours by--
(A) Any duly authorized employee or representative of the
Department, the Internal Revenue Service or the Securities and Exchange
Commission;
(B) Any fiduciary of a Plan who has authority to acquire or dispose
of shares of the Fund owned by such Plan, or any duly authorized
employee or representative of such fiduciary;
(C) Any contributing employer to any participating Plan or any duly
authorized employee representative of such employer; and
(D) Any participant or beneficiary of any participating Plan, or
any duly authorized representative of such participant or beneficiary.
(2) None of the persons described in paragraph (k)(1)(B)-(D) shall
be authorized to examine trade secrets of EAI, or commercial or
financial information which is privileged or confidential.
Section II. Definitions
For purposes of this exemption:
(a) The term ``EAI'' means EAI Partners, L.P. and the term ``EACM''
refers to Evaluation Associates Capital Markets, Inc.
(b) An ``affiliate'' of EAI includes--
(1) Any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control
with EAI. (For purposes of this paragraph, the term ``control'' means
the power to exercise a controlling influence over the management or
policies of a person other than an individual.)
(2) Any officer, director, employee, relative or partner in such
person, and
(3) Any corporation or partnership of which such person is an
officer, director, partner or employee.
(c) The term ``Fund'' refers to the EAI Select Managers Investment
Fund, a diversified open-end investment company registered under the
'40 Act for which EACM serves as an investment adviser and may also
provide some other ``Secondary Service'' (as defined below in paragraph
(g) of this Section II) which has been approved by the Fund.
(d) The term ``net asset value'' means the amount for purposes of
pricing all purchases and redemptions of Fund shares, calculated by
dividing the value of all securities, determined by a method as set
forth in a Fund's prospectus and statement of additional information,
and other assets belonging to the Fund, less the liabilities chargeable
to the portfolio, by the number of outstanding shares.
(e) The term ``relative'' means a ``relative'' as that term is
defined in section 3(15) of the Act (or member of the ``family'' as
that term is defined in section 4975(e)(6) of the Code), or a brother,
a sister, or a spouse of a brother or a sister.
(f) The term ``Second Fiduciary'' means a fiduciary of a plan who
is independent of and unrelated to EAI. For purposes of this exemption,
the Second Fiduciary will not be deemed to be independent of and
unrelated to EAI if--
(1) Such Second Fiduciary directly or indirectly controls, is
controlled by, or is under common control with EAI;
(2) Such Second Fiduciary, or any officer, director, partner,
employee, or relative of such Second Fiduciary is an officer, director,
partner or employee of EAI (or is a relative of such persons;
(3) Such Second Fiduciary directly or indirectly receives any
compensation or other consideration for his or her own personal account
in connection with any transaction described in this proposed
exemption. However, with respect to the Related Plans (i.e., the EAI
Plan, the Harding Plan and the Stockwood Plan), the Second Fiduciary
may receive compensation from EAI in connection with the transaction
contemplated herein, but the amount or payment of such compensation may
not be contingent upon or be in any way affected by the Second
Fiduciary's ultimate decision regarding whether the Related Plans may
participate in such transaction.
With the exception of the Related Plans, if an officer, director,
partner or employee of EAI (or relative of such persons), is a director
of such Second Fiduciary, and if he or she abstains from participation
in the choice of a Client Plan's investment adviser, the approval of
any such purchase or sale between a Client Plan and the Fund, and the
approval of any change of fees charged to or paid by the Client Plan,
the transaction described in Section I above, then paragraph (f)(2) of
this Section II, shall not apply.
[[Page 31961]]
(g) The term ``Secondary Service'' means a service, other than
investment advisory or similar service which is provided by EACM to the
Fund. However, the term ``Secondary Service'' does not include any
brokerage services provided by EAI Securities Inc. to the Fund.
EFFECTIVE DATE: This exemption will be effective December 29, 1995.
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 April 25, 1996 at 61 FR
18424.
FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Pension Plan of Roper Hospital, Inc. (the Plan), Located in Charleston,
South Carolina
[Prohibited Transaction Exemption 96-48; Exemption Application No. D-
10163]
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 cash sale (the Sale) by the Plan of Separate
Investment Account Group Annuity Policy No. GA-4619 (the Policy)
maintained by New England Mutual Life Insurance Company to Roper Health
System, Inc., the Plan sponsor and a party in interest with respect to
the Plan, provided the following conditions are satisfied: (a) the Sale
is a one-time transaction for cash; (b) the Plan receives no less than
the greater of the fair market value of the Policy at the time of the
Sale, or $494,130; and (c) the Plan does not pay any commissions or
other expenses in connection with the transaction.
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 April 25, 1996 at 61 FR
18428.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
First Security Group Life Insurance Plan (the Plan), Located in Salt
Lake City, Utah
[Prohibited Transaction Exemption 96-49; Exemption Application No. L-
10178]
Exemption
The restrictions of sections 406(a) and (b) of the Act shall not
apply to the reinsurance of risks and the receipt of premiums therefrom
by First Security Life Insurance Company of Arizona (FSLIA) from the
insurance contracts sold by Minnesota Mutual Life Insurance Company
(MM) or any successor insurance company to MM which is unrelated to
First Security Corporation (FSC), to provide life insurance benefits to
participants in the Plan, provided the following conditions are met:
(a) FSLIA--
(1) Is a party in interest with respect to the Plan by reason of a
stock or partnership affiliation with FSC that is described in section
3(14)(E) or (G) of the Act,
(2) Is licensed to sell insurance or conduct reinsurance operations
in at least one of the United States or in the District of Columbia,
(3) Has obtained a Certificate of Authority from the Insurance
Commissioner of its domiciliary state which has neither been revoked
nor suspended, and
(4)(A) Has undergone an examination by an independent certified
public accountant for its last completed taxable year immediately prior
to the taxable year of the reinsurance transaction; or
(B) Has undergone a financial examination (within the meaning of
the law of its current domiciliary State, Arizona) by the Insurance
Commissioner of the State of Arizona within 5 years prior to the end of
the year preceding the year in which the reinsurance transaction
occurred.
(b) The Plan pays no more than adequate consideration for the
insurance contracts;
(c) No commissions are paid with respect to the direct sale of such
contracts or the reinsurance thereof; and
(d) For each taxable year of FSLIA, the gross premiums and annuity
considerations received in that taxable year by FSLIA for life and
health insurance or annuity contracts for all employee benefit plans
(and their employers) with respect to which FSLIA is a party in
interest by reason of a relationship to such employer described in
section 3(14)(E) or (G) of the Act does not exceed 50% of the gross
premiums and annuity considerations received for all lines of insurance
(whether direct insurance or reinsurance) in that taxable year by
FSLIA. For purposes of this condition (d):
(1) the term ``gross premiums and annuity considerations received''
means as to the numerator the total of premiums and annuity
considerations received, both for the subject reinsurance transactions
as well as for any direct sale or other reinsurance of life insurance,
health insurance or annuity contracts to such plans (and their
employers) by FSLIA. This total is to be reduced (in both the numerator
and the denominator of the fraction) by experience refunds paid or
credited in that taxable year by FSLIA.
(2) all premium and annuity considerations written by FSLIA for
plans which it alone maintains are to be excluded from both the
numerator and the denominator of the fraction.
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 April 25, 1996 at 61 FR
18433.
EFFECTIVE DATE: This exemption is effective August 1, 1993.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest or disqualified
person from certain other provisions to which the exemptions does not
apply and the general fiduciary responsibility provisions of section
404 of the Act, which among other things require a fiduciary to
discharge his duties respecting the plan solely in the interest of the
participants and beneficiaries of the plan and in a prudent fashion in
accordance with section 404(a)(1)(B) of the Act; nor does it affect the
requirement of section 401(a) of the Code that the plan must operate
for the exclusive benefit of the employees of the employer maintaining
the plan and their beneficiaries;
(2) These exemptions are supplemental to and not in derogation of,
any other provisions of the Act and/or the Code, including statutory or
administrative exemptions and transactional rules. Furthermore, the
fact that a transaction is subject to an administrative or statutory
exemption is not dispositive of whether the
[[Page 31962]]
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 18th day of June, 1996.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits,
Administration, U.S. Department of Labor.
[FR Doc. 96-15876 Filed 6-20-96; 8:45 am]
BILLING CODE 4510-29-P
