[Federal Register Volume 63, Number 130 (Wednesday, July 8, 1998)]
[Notices]
[Pages 36943-36946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18011]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 98-35; Exemption Application Nos. D-
10546]
Grant of Amendment to Prohibited Transaction Exemption (PTE) 97-
35 Involving the Amalgamated Bank of New York (the Bank) Located in New
York, NY
AGENCY: Pension and Welfare Benefits Administration, U.S. Department of
Labor.
ACTION: Grant of Amendment to PTE 97-35.
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SUMMARY: This document contains a final exemption which amends PTE 97-
35 (62 FR 41088, July 31, 1997), an individual administrative exemption
involving the provision of banking services by the Bank to 22 employee
benefit plans (the Plans) listed in the exemption, all of which are
affiliated with the Union of Needletrades, Industrial and Textile
Employees (UNITE), which is the majority and controlling shareholder in
the Bank. These transactions are described in a notice of pendency that
was published in the Federal Register on March 30, 1998 at 63 FR 15228.
EFFECTIVE DATE: This exemption is effective as of July 1, 1995, except
for: (1) Plan investments in the LEI Fund, for which the effective date
is January 3, 1998; (2) Plan investments in the LongView 500 Index
Fund, for which the effective date is December 8, 1997; and (3)
transactions involving the UNITE Staff Retirement Plan, for which the
effective date is July 8, 1998.
FOR FURTHER INFORMATION CONTACT: Mr. Ron Willett, Office of Exemption
Determinations, Pension and Welfare Benefits Administration, U.S.
Department of Labor, Washington, D.C. 20210, telephone (202) 219-8881.
(This is not a toll-free number.)
SUPPLEMENTARY INFORMATION: On March 30, 1998, the Department of Labor
(the Department) published a notice of proposed exemption (the Notice)
in the Federal Register (63 FR 15228) to amend PTE 97-35. PTE 97-35
provides an exemption from certain prohibited transaction restrictions
of sections 406(a), 406(b)(1) and (b)(2) of the Employee Retirement
Income Security Act of 1974 as amended (the Act), and from the
sanctions resulting from the application of section 4975 of the
Internal Revenue Code of 1986 as amended (the Code), by reason of
section 4975(c)(1)(A) through (E) of the Code. The Notice was requested
in an application filed on behalf of the Bank pursuant to section
408(a) of the Act and section 4975(c)(2) of the Code, and in accordance
with the procedures set forth in 29 CFR Part 2570, Subpart B(55 FR
32836, August 10, 1990) (the Procedures). Effective December 31, 1978,
section 102 of Reorganization Plan No. 4 of 1978 (5 USC App.1, 1996)
transferred the authority of the Secretary of the Treasury to issue
exemptions of the type requested to the Secretary of Labor.
Accordingly, this exemption is being issued solely by the Department.
WRITTEN COMMENTS: The Notice gave interested persons the opportunity to
comment and to request a public hearing on the matters described
therein. The Department received one written comment and no hearing
requests from interested persons following the dissemination of the
Notice and supplemental statement.
The written comment received by the Department was submitted on
behalf of the Bank concerning the effective date of a portion of the
requested exemption, as proposed in the Notice. In this regard, the
Notice proposed that the effective date for the final exemption be
described as follows:
Effective Date: This exemption will be effective as of July 1,
1995, except for: (1) Plan investments in the LEI Fund, for which
the effective date will be January 3, 1998; (2) Plan investments in
the LongView 500 Index Fund, for which the effective date will be
the date on which the final amended exemption, if granted, is
published in the Federal Register; and (3) transactions involving
the UNITE Staff Retirement Plan, for which the effective date will
be the date on which the final amended exemption, if granted, is
published in the Federal Register.
The Bank states that in its exemption application a request was
made for the final exemption to be effective as of the date the
application was filed with the Department (i.e., December 4, 1997) with
respect to Plan investments in the LongView 500 Fund (the 500 Fund),
because the Bank had expected that Plan investments in the 500 Fund
would occur shortly after such filing. However, in the Notice, the
proposed effective date with respect to Plan investments in the 500
Fund was inadvertantly described as the date on which the final
exemption, if granted, would be published in the Federal Register. In
its comment, the Bank explains that the actual date of the first
investment made by a Plan in the 500 Fund was December 8, 1997, when
the ILGWU Death Benefit Plan (one of the Plans covered by PTE 97-35)
made such an investment. Therefore, the Bank requests that the final
exemption for Plan investments in the 500 Fund be effective as of
December 8, 1997. In the final exemption, the Department has stated the
effective date in accordance with the Bank's request, by inserting a
reference to the appropriate date in both the definition of ``Banking
Services'' in Section IV(c) and the effective date paragraph for this
Grant notice.
Based on the entire application record, including the Bank's
written comment regarding the Notice, the Department has determined to
grant the amendment to PTE 97-35 with the modification to the effective
date requested by the Bank.
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 section 4975(c)(2) of the Code does
not relieve a fiduciary or other party in interest or disqualified
person from certain other provisions of the Act and the Code, including
any prohibited transaction provisions to which the exemption does not
apply and the general fiduciary responsibility provisions of section
404 of the Act, which require, among other things, a fiduciary to
discharge his or her 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 requirements of section 401(a) of the Code that the plan
operate for the exclusive benefit of the employees of the employer
maintaining the plan and their beneficiaries;
[[Page 36944]]
(2) The exemption will not extend to transactions prohibited under
section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;
(3) In accordance with section 408(a) of the Act and 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 finds that the exemption is
administratively feasible, in the interests of the plans and their
participants and beneficiaries and protective of the rights of the
participant and beneficiaries;
(4) This exemption will be supplemental to, and not in derogation
of, any other provisions of the Act and the Code, including statutory
or administrative exemptions. 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
(5) This exemption is subject to the express condition that the
Summary of Facts and Representations set forth in the proposed
exemption relating to PTE 97-35, as amended by this grant notice,
accurately describe, where relevant, the material terms of the
transactions consummated pursuant to that exemption.
Exemption
Under the authority of section 408(a) of the Act and section
4975(c)(2) of the Code and in accordance with the Procedures cited
above, the Department hereby amends PTE 97-35.
Section I--Transactions
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, effective July 1, 1995 [except as otherwise indicated
herein], to--
(A) The provision of banking services (Banking Services, as defined
in section IV(C)) by the Amalgamated Bank of New York (the Bank) to
certain employee benefit plans (the Plans, as defined in section
IV(E)), which are maintained on behalf of members of the former
International Ladies Garment Workers Union (ILGWU), which merged on
July 1, 1995 with the Amalgamated Clothing and Textile Workers Union to
form the Union of Needletrades, Industrial and Textile Employees
(UNITE);
(B) The purchase by the Plans of certificates of deposit (CDs)
issued by the Bank; and
(C) The deposit of Plans' assets in money market or other deposit
accounts established by the Bank; provided that the applicable
conditions of Section II and Section III are met.
Section II--Conditions
(A) The terms under which the Banking Services are provided by the
Bank to the Plans, and those under which the Plans purchase CDs from
the Bank or maintain deposit accounts with the Bank, are at least as
favorable to the Plans as those which the Plans could obtain in arm's-
length transactions with unrelated parties.
(B) The interests of each of the Plans with respect to the Bank's
provision of Banking Services to the Plans, the purchase of CDs from
the Bank by any of the Plans, and the deposit of Plan assets in deposit
accounts established by the Bank, are represented by an Independent
Fiduciary (as defined in section IV(D)).
(C) On a periodic basis, not less frequently than annually, an
Authorizing Plan Fiduciary (as defined below in section IV(A)) with
respect to each Plan authorizes the representation of the Plan's
interests by the Independent Fiduciary and determines that the Banking
Services and any CDs and depository accounts utilized by the Plan are
necessary and appropriate for the establishment or operation of the
Plan.
(D) With respect to the purchase by any of the Plans of
certificates of deposit (CDs) issued by the Bank or the deposit of Plan
assets in a money market account or other deposit account established
at the Bank: (1) Such transaction complies with the conditions of
section 408(b)(4) of the Act; (2) Any CD offered to the Plans by the
Bank is also offered by the Bank in the ordinary course of its business
with unrelated customers; and (3) Each CD purchased from the Bank by a
Plan pays the maximum rate of interest for CDs of the same size and
maturity being offered by the Bank to unrelated customers at the time
of the transaction.
(E) The compensation received by the Bank for the provision of
Banking Services to the Plan is not in excess of reasonable
compensation within the meaning of section 408(b)(2) of the Act.
(F) Following the merger of the ILGWU into UNITE, the Independent
Fiduciary made an initial written determination that (1) the Bank's
provision of Banking Services to the Plans, (2) the deposit of Plan
assets in depository accounts maintained by the Bank, and (3) the
purchase by the Plans of CDs from the Bank, are in the best interests
and protective of the participants and beneficiaries of each of the
Plans.
(G) On a periodic basis, not less frequently than quarterly, the
Bank provides the Independent Fiduciary with a written report (the
Periodic Report) which includes the following items with respect to the
period since the previous Periodic Report: (1) a listing of Banking
Services provided to, all outstanding CDs purchased by, and deposit
accounts maintained for each Plan; (2) a listing of all fees paid by
the Plans to the Bank for the Banking Services, (3) the performance of
the Bank with respect to all investment management services, (4) a
description of any changes in the Banking Services, (5) an explanation
of any problems experienced by the Bank in providing the Banking
Services, (6) a description of any material adverse events affecting
the Bank, and (7) any additional information requested by the
Independent Fiduciary in the discharge of its obligations under this
exemption.
(H) On a periodic basis, not less frequently than annually, the
Independent Fiduciary reviews the Banking Services provided to each
Plan by the Bank, the compensation received by the Bank for such
services, any purchases by the Plan of CDs from the Bank, and any
deposits of assets in deposit accounts maintained by the Bank, and
makes the following written determinations:
(1) The continuation of the Bank's provision of Banking Services to
the Plan for compensation is in the best interests and protective of
the participants and beneficiaries of the Plan;
(2) The Bank is a solvent financial institution and has the
capability to perform the services;
(3) The fees charged by the Bank are reasonable and appropriate;
(4) The services, the depository accounts, and the CDs are offered
to the Plan on the same terms under which the Bank offers the services
to unrelated Bank customers in the ordinary course of business; and
(5) Where the Banking Services include an investment management
service, that the rate of return is not less favorable to the Plan than
the rates on comparable investments involving unrelated parties.
(I) Copies of the Bank's periodic reports to the Independent
Fiduciary are furnished to the Authorizing Plan Fiduciaries on a
periodic basis, not less frequently than annually and not later than 90
days after the period to which they apply.
(J) The Independent Fiduciary is authorized to continue, amend, or
terminate, without any penalty to any Plan (other than the payment of
[[Page 36945]]
penalties required under federal or state banking regulations upon
premature redemption of a CD), any arrangement involving: (1) the
provision of Banking Services by the Bank to any of the Plans, (2) the
deposit of Plan assets in a deposit account maintained by the Bank, or
(3) any purchases by a Plan of CDs from the Bank;
(K) The Authorizing Plan Fiduciary may terminate, without penalty
to the Plan (other than the payment of penalties required under federal
or state banking regulations upon premature redemption of a CD), the
Plan's participation in any arrangement involving: (1) the
representation of the Plan's interests by the Independent Fiduciary,
(2) the provision of Banking Services by the Bank to the Plan, (3) the
deposit of Plan assets in a deposit account maintained by the Bank, or
(4) the purchase by the Plan of CDs from the Bank.
Section III--Recordkeeping
(A) For a period of six years, the Bank and the Independent
Fiduciary will maintain or cause to be maintained all written reports
and other memoranda evidencing analyses and determinations made in
satisfaction of conditions of this exemption, except that: (a) a
prohibited transaction will not be considered to have occurred if, due
to circumstances beyond the control of the Independent Fiduciary and
the Bank, the records are lost or destroyed before the end of the six-
year period; and (b) no party in interest other than the Bank and the
Independent Fiduciary 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 (B)
below;
(B)(1) Except as provided in section (2) of this paragraph (B) and
notwithstanding any provisions of subsections (a)(2) and (b) of section
504 of the Act, the records referred to in paragraph (A) of this
Section III shall be unconditionally available at their customary
location during normal business hours for inspection by: (a) any duly
authorized employee or representative of the U.S. Department of Labor
or the Internal Revenue Service, (b) any employer participating in the
Plans or any duly authorized employee or representative of such
employer, and (c) any participant or beneficiary of the Plans or any
duly authorized representative of such participant or beneficiary.
(2) None of the persons described in subsections (b) and (c) of
section (1) above shall be authorized to examine trade secrets of the
Independent Fiduciary or the Bank, or any of their affiliates, or any
commercial, financial, or other information that is privileged or
confidential.
Section IV--Definitions
(A) ``Authorizing Plan Fiduciary'' means, with respect to each
Plan, the board of trustees of the Plan or other appropriate plan
fiduciary with discretionary authority to make decisions with respect
to the investment of Plan assets;
(B) ``Bank'' means the Amalgamated Bank of New York;
(C) ``Banking Services'' means (1) custodial, safekeeping, checking
account, trustee services, and (2) investment management services
involving (a) fixed income securities (either directly or through a
collective investment fund maintained by the Bank), (b) the LongView
Fund maintained by the Bank, (c) effective December 8, 1997, the
LongView 500 Index Fund, and (d) effective January 3, 1998, the LEI
Fund maintained by the Bank.
(D) ``Independent Fiduciary'' means a person, within the meaning of
section 3(9) of the Act, who (1) is not an affiliate of the Union of
Needletrades, Industrial & Textile Employees (UNITE) and any successor
organization thereto by merger, consolidation or otherwise, (2) is not
an officer, director, employee or partner of UNITE, (3) is not an
entity in which UNITE has an ownership interest, (4) has no
relationship with the Bank other than as Independent Fiduciary under
this exemption, and (5) has acknowledged in writing that it is acting
as a fiduciary under the Act. No person may serve as an Independent
Fiduciary for the Plans for any fiscal year in which the gross income
(other than fixed, non-discretionary retirement income) received by
such person (or any partnership or corporation of which such person is
an officer, director, or ten percent or more partner or shareholder)
from UNITE and the Plans for that fiscal year exceed five (5) percent
of such person's annual gross income from all sources for the prior
fiscal year. An affiliate of a person is any person directly or
indirectly, through one or more intermediaries, controlling, controlled
by, or under common control with the person. The term ``control'' means
the power to exercise a controlling influence over the management or
policies of a person other than an individual. Initially, the
Independent Fiduciary is U.S. Trust Company of California, N.A.
(E) ``Plans'' means any of the following employee benefit plans,
and their successors by reason of merger, spin-off or otherwise:
International Ladies Garment Workers Union Nation Retirement Fund;
International Ladies Garment Workers Union Death Benefit Fund;
Health Fund of New York Coat, Suit, Dress, Rainwear & Allied Workers
Union, ILGWU;
Health & Vacation Fund, Amalgamated Ladies Garment Cutters Union, Local
10;
ILGWU Eastern States Health & Welfare Fund;
ILGWU Office, Clerical & Misc. Employee Retirement Fund;
ILGWU Retirement Fund, Local 102;
Union Health Center Staff Retirement Fund;
Unity House 134 HREBIU Plan Fund;
Puerto Rican Health & Welfare Fund;
Health & Welfare Fund of Local 99, ILGWU;
Local 99 Exquisite Form Industries, Inc. Severance Fund;
Local 99 K-Mart Severance Fund;
Local 99 Kenwin Severance Fund;
Local 99 Lechters Severance Fund;
Local 99 Eleanor Shops Severance Fund;
Local 99 Monette Severance Fund;
Local 99 Moray, Inc. Severance Fund;
Local 99 Petri Stores, Inc. Severance Fund;
Local 99 Netco, Inc. Severance Fund;
Local 99 Misty Valley, Inc. Severance Fund;
Local 99 Norstan Apparel Shops, Inc. Severance Fund; and
UNITE Staff Retirement Plan, ILGWU Unit.
(F) ``UNITE'' means the Union of Needletrades, Industrial & Textile
Employees and any successor organization thereto by merger,
consolidation or otherwise.
Effective Date: This exemption is effective as of July 1, 1995, except
for: (1) Plan investments in the LEI Fund, for which the effective date
is January 3, 1998; (2) Plan investments in the LongView 500 Index
Fund, for which the effective date is December 8, 1997; and (3)
transactions involving the UNITE Staff Retirement Plan, for which the
effective date is July 8, 1998.
The availability of this exemption is subject to the express
condition that the material facts and representations contained in the
application for exemption are true and complete and accurately describe
all material terms of the transactions. In the case of continuing
transactions, if any of the material facts or representations described
in the application change, the
[[Page 36946]]
exemption will cease to apply as of the date of such change. In the
event of any such change, an application for a new exemption must be
made to the Department.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the proposed exemption (i.e., the Notice) and the prior grant notice
for PTE 97-35, which are cited above.
Signed at Washington, D.C., this 1st day of July, 1998.
Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 98-18011 Filed 7-7-98; 8:45 am]
BILLING CODE 4510-29-P
