[Federal Register Volume 64, Number 150 (Thursday, August 5, 1999)]
[Notices]
[Pages 42717-42726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20191]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 99-32; Exemption Application No.D-
09708, et al.]
Grant of Individual Exemptions; RREEF America L.L.C. (RREEF), 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
[[Page 42718]]
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.
RREEF America L.L.C. (RREEF) Located in San Francisco, California
[Prohibited Transaction Exemption 99-32; Exemption Application No. D-
09708]
Exemption
The Department is granting an 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 set forth in 29 CFR Part 2570, Subpart B
(55 FR 32836, 32847, August 10, 1990.)
Part I--Exemption for Payment of Certain Fees to RREEF
The restrictions of sections 406(b)(1) and (b)(2) of the Act and
the taxes imposed by section 4975 of the Code, by reason of section
4975(c)(1)(E) of the Code, shall not apply, effective as of (i) May 16,
1994, with respect to a single client, separate account established on
behalf of the Shell Pension Trust (the Shell Account), and (ii) the
date this final exemption is published in the Federal Register, with
respect to any single client, separate account (Single Client Account)
or any multiple client account (Multiple Client Account) formed on, or
after, such a date, to the payment of certain initial investment fees
(the Investment Fee), annual management fees based upon net operating
income (the Asset Management Fee), and performance fees (the
Performance Fee) to RREEF by employee benefit plans for which RREEF
provides investment management services (the Client Plans) 1
pursuant to an investment management agreement (the Agreement) entered
into between RREEF and the Client Plans either individually, through an
establishment (or amendment) of a Single Client Account, or
collectively as participants in a newly established Multiple Client
Account (collectively, the Accounts), provided that the conditions set
forth below in Part III are satisfied.
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\1\ The Client Plans (including employee benefit plans that may
become Client Plans in the future) consist of various pension plans
as defined in section 3(2) of the Act and other plans as defined in
section 4975(e)(1) of the Code with respect to which RREEF serves as
a trustee or an investment manager.
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Part II--Exemption for Investments in a Multiple Client Account
The restrictions of section 406(a)(1)(A) through (D) of the Act and
the taxes imposed by section 4975(c)(1)(A) through (D) of the Code,
shall not apply to any investment by a Client Plan in a Multiple Client
Account managed by RREEF formed on, or after, the date the final
exemption is published in the Federal Register, provided that the
conditions set forth below in Part III are satisfied.
Part III--General Conditions
(a)(1) The investment of plan assets in a Single or Multiple Client
Account, including the terms and payment of any Investment Fee, Asset
Management Fee and Performance Fee (collectively; the Fees), shall be
approved in writing by a fiduciary of a Client Plan which is
independent of RREEF and its affiliates (the Independent Fiduciary).
(2) For purposes of the Fees, the fair market value of the
Accounts' real property assets (other than in the case of actual sales)
will be based on appraisals prepared by independent qualified
appraisers that are Members of the Appraisal Institute (MAI
Appraisers). In this regard, every agreement by which an appraiser is
retained will include the appraiser's representation that: (1) Its
ultimate client is the Account and its underlying Client Plan (and non-
Plan) investors, and (2) it will perform its duties in the interest of
such Account (and investors). In addition, following the date this
final exemption is published in the Federal Register, every agreement
shall advise the appraiser that it owes a professional obligation to
the Account when making an appraisal for properties held by the
Account.
(b) The terms of any investment in an Account and of the Fees,
shall be at least as favorable to the Client Plans as those obtainable
in arm's-length transactions between unrelated parties.
(c) At the time any Account is established (or amended) and at the
time of any subsequent investment of assets (including the reinvestment
of assets) in such Account:
(1) Each Client Plan in a Single Client Account shall have total
net assets with a value in excess of $100 million, and each Client Plan
that is an investor in a Multiple Client Account shall have total net
assets with a value in excess of $50 million; and provided that
seventy-five percent (75%) or more of the units of beneficial interests
in a Multiple Client Account are held by Client Plans or other
investors having total assets of at least $100 million. In addition, 50
percent (50%) or more of the Client Plans investing in a Multiple
Client Account shall have assets of at least $100 million. A group of
Client Plans maintained by a single employer or controlled group of
employers, any of which individually has assets of less than $100
million, will be counted as a single Client Plan if the decision to
invest in the Account (or the decision to make investments in the
Account available as an option for an individually directed account) is
made by a fiduciary other than RREEF, who exercises such discretion
with respect to Client Plan assets in excess of $100 million.
(2) No Client Plan shall invest, in the aggregate, more than 5% of
its total assets in any Account or more than 10% of its total assets in
all Accounts established by RREEF.
(d) Prior to making an investment in any Account (or amending an
existing Account), the Independent Fiduciary of each Client Plan
investing in an Account shall have received offering materials from
RREEF which disclose all material facts concerning the purpose,
structure, and operation of the Account, including any Fee arrangements
(provided that, in the case of an amendment to the Fee arrangements,
such materials need address only the amended fees and any other
material change to the Account's original offering materials).
[[Page 42719]]
(e) With respect to its ongoing participation in an Account, each
Client Plan shall receive the following written information from RREEF:
(1) Audited financial statements of the Account prepared by
independent public accountants selected by RREEF no later than 90 days
after the end of the fiscal year of the Account;
(2) Quarterly and annual reports prepared by RREEF relating to the
overall financial position and operating results of the Account and, in
the case of a Multiple Client Account, the value of each Client Plan's
interest in the Account. Each such report shall include a statement
regarding the amount of fees paid to RREEF during the period covered by
such report;
(3) Periodic appraisals (as agreed upon with the Client Plans)
indicating the fair market value of the Account's assets as established
by an MAI appraiser independent of RREEF and its affiliates. In the
case of any appraisal that will serve as the basis for any ``deemed
sale'' of such property for purposes of calculating the Performance Fee
payable to RREEF (as discussed in paragraph (j) below), then:
(i) In the case of any Single Client Account, such MAI appraiser
shall be either (A) selected by the Independent Fiduciary of the Client
Plan subject to the affirmative approval of RREEF, or (B) selected by
RREEF subject to approval by the Independent Fiduciary of the Client
Plan;
(ii) In the case of any Multiple Client Account, such MAI appraiser
shall be approved in advance by the Responsible Independent Fiduciaries
(as defined in Part IV(e) below) owning a majority of the interests in
the Accounts, determined according to the latest valuation of the
Account's assets performed no more than 12 months prior to such
appraisal, which approval may be by written notice and deemed consent
by such Fiduciaries' failure to object to the appraiser within 30 days
of such notice; and
(iii) In either case, the selected MAI appraiser shall acknowledge
in writing that the Client Plan(s) and other investors (in the case of
a Multiple Client Account), rather than RREEF, is (are) its clients,
and that in performing its services for the Account it shall act in the
sole interest of such Client Plan(s) and other investors. In addition,
following the date this final exemption is published in the Federal
Register, every appraiser selected shall acknowledge that it owes a
professional obligation to the Client Plan(s) and other investors in
the Account in performing its services as an appraiser for properties
in the Account. If an MAI appraiser selected by RREEF, or an appraisal
performed by a previously approved appraiser, is rejected by the
Independent Fiduciary for a Single Client Account or the Responsible
Independent Fiduciaries for the Multiple Client Account, determined
according to the latest valuation of the Account's assets performed no
more than 12 months prior to such appraisal, the fair market value of
the assets for any ``deemed sale'', relating to the payment of a
Performance Fee (as described in paragraphs (i) and (j) below) shall be
determined as follows: (A) the Client Plans shall appoint a second
appraiser and, if the value established for the property does not
deviate by more than 10% (or such lesser amount as may be agreed upon
between RREEF and the Client Plan(s)), then the two appraisals shall be
averaged; (B) if the values differ by more than 10%, then the two
appraisers shall select a third appraiser, that is independent of RREEF
and its affiliates, who will attempt to mediate the difference; (C) if
the third appraiser can cause the first two to reach an agreement on a
value, that figure shall be used; however, (D) if no agreement can be
reached, the third appraiser shall determine the value based on
procedures set out in the governing agreements of the Account or, if no
such procedures are established, shall conduct its own appraisal and
the two closest of the three shall be averaged;
(4) In the case of any Multiple Client Account, a list of all other
investors in the Account;
(5) Annual operating and capital budgets with respect to the
Account, to be distributed to a Client Plan within 60 days prior to the
beginning of the fiscal year to which such budgets relate; and
(6) An explanation of any material deviation from the budgets
previously provided to such Client Plan for the prior year.
(f) The total fees paid to RREEF shall constitute no more than
``reasonable compensation'' within the meaning of section 408(b)(2) of
the Act.
(g) The Investment Fee shall be equal to a specified percentage of
the net value of the Client Plan assets allocated to the Account which
shall be payable either:
(1) At the time assets are deposited (or deemed deposited in the
case of reinvestment of assets) in the Account; or
(2) In periodic installments, the amount (as a percentage of the
aggregate Investment Fee) and timing of which have been specified in
advance based on the percentage of the Client Plan's assets invested in
real property as of the payment date; provided that (i) the installment
period is no less than three months, and (ii) if the percentage of the
Client Plan assets which have actually been invested by a payment date
is less than the percentage required for the aggregate Investment Fee
to be paid in full through that date (both determined on a cumulative
basis), the Investment Fee paid on such a date shall be reduced by the
amount necessary to cause the percentage of the aggregate Investment
Fee paid to equal only the percentage of the Client Plan assets
actually invested by that date. The unpaid portion of such Investment
Fee shall be deferred to and payable on a cumulative basis on the next
scheduled payment date (subject to the percentage limitation described
in the preceding sentence).
(h) The Asset Management Fee shall be payable for each quarter from
the net operating income (NOI) of the Account. The amount of the Asset
Management Fee, expressed as a percentage of the NOI of the Account,
shall be established by the Agreement and agreed to by the Independent
Fiduciaries of the Client Plans:
(1) The Asset Management Fee for any Account will be calculated as
follows. The Asset Management Fee for a specific Account real property
will be based solely on items of operating income and expense that are
identified as line items on an operating budget for such property
disclosed to each Client Plan that participates in the Account. The
disclosures have to be made at least 30 days in advance of the fiscal
year to which the budget relates, and approved in the manner described
in (2) below;
(2) Each Client Plan must provide affirmative approval of the
operating budget. Specifically, when the proposed budget (or any
material deviation therefrom) is sent to a Client Plan, it will be
accompanied by a written notice that the Client Plan may object to the
budget or any specific line item therein, for purposes of calculating
the Asset Management Fees for the next fiscal year. The written notice
will contain a statement that affirmative approval of the budget is
required prior to the end of the 30-day period following such
disclosure. In the case of a Multiple Client Account, affirmative
approval by a majority of investors (by interest) will constitute
approval of the proposed budget (or deviation); and
(3) In the event of any subsequent decrease in previously approved
budgeted operating expenses for the fiscal year in excess of the limits
previously described (i.e., no more than 15% for any line item or 5%
overall), then the resulting increase in NOI (i.e., over and above the
allowable deviation)
[[Page 42720]]
will not be taken into account in calculating RREEF's management fee
unless affirmative approval for the payment of such fee is obtained in
writing from the Independent Fiduciary for the Client Plan in the
Single Client Account or the Responsible Independent Fiduciaries for
the Multiple Client Account.
(i) In the case of any Multiple Client Account, the Performance Fee
shall be payable after the Client Plan has received distributions from
the Account in excess of an amount equal to 100% of its invested
capital plus a pre-specified annual compounded cumulative rate of
return (the Threshold Amount or Hurdle Rate). However, in the case of
RREEF's removal or resignation, RREEF shall be entitled to receive a
Performance Fee payable either at the time of removal or, in the event
of RREEF's resignation, upon sale of the assets to which the
Performance Fee is allocable or upon termination of the Account as the
case may be, subject to the requirements of paragraph (l) below, as
determined by a deemed distribution of the assets of the Account based
on an assumed sale of such assets at their fair market value (in
accordance with independent appraisals), only to the extent that the
Client Plan would receive deemed distributions from the Account in
excess of an amount equal to the Threshold Amount at the time of
RREEF's removal or resignation. Both the Threshold Amount and the
amount of the Performance Fee, expressed as a percentage of the net
proceeds from a capital event distributed (or deemed distributed) from
the Account in excess of the Threshold Amount, shall be established by
the Agreement and agreed to by the Independent Fiduciaries of the
Client Plans.
(j) In the case of any Single Client Account, the Performance Fee
shall be determined and paid either: (1) in the same manner as in the
case of a Multiple Client Account, as described in paragraph (i) above;
or (2) at the end of any pre-specified period of not less than one
year, provided that such Fee is based upon the sum of all actual
distributions from the Account during such period, plus deemed
distributions of the assets of the Account based on an assumed sale of
all such assets at their fair market value as of the end of such period
(in accordance with independent appraisals performed within 12 months
of the calculation) which are calculated to be in excess of the
Threshold Amount or the Hurdle Rate through the end of such period. For
this purpose, the Performance Fee measuring period shall be established
by the Agreement and agreed to by the Independent Fiduciary of the
Client Plan, provided that such period is not less than one year. In
addition, RREEF shall provide notice to the Client Plan within 60 days
of each Performance Fee calculation for a Single Client Account that
the Independent Fiduciary of the Client Plan has the right to request
updated appraisals of the properties held by the Account if such
Fiduciary determines that the existing independent appraisals
(performed within 12 months of the calculation) are no longer
sufficient.
(k) The Threshold Amount for any Performance Fee shall include as
least a minimum rate of return to the Client Plan, as defined below in
Part IV, paragraph (f).
(l) In the event RREEF resigns as investment manager for an
Account, the Performance Fee shall be calculated at the time of
resignation as described above in paragraph (i) and allocated among
each property, based on the appraised value of such property in
relationship to the total appraised value of the Account. Each amount
arrived at through this calculation shall be multiplied by a fraction,
the numerator of which will be the actual sales price received by the
Account on subsequent disposition of the property (or in the case of a
property which has not been sold prior to the termination of a Multiple
Client Account, the appraised value of the property as of the
termination date), and the denominator of which will be the appraised
value of the property which was used in connection with determining the
Performance Fee at the time of resignation, provided that this fraction
shall never exceed 1.0. The resulting amount for each property shall be
the Performance Fee payable to RREEF upon the sale of such property or
termination of the Multiple Client Account, as the case may be.
(m) In cases where RREEF does have discretion to reinvest proceeds
from capital events, the reinvested amount shall not be treated as a
new contribution of capital by the Client Plan for purposes of the
Investment Fee, as described above in paragraph (g), or having been
distributed for purposes of the payment of Performance Fee as described
above in paragraphs (i) and (j);
(n) RREEF or its affiliates shall maintain, for a period of six
years, the records necessary to enable the persons described in
paragraph (o) of this Part III 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 RREEF 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 RREEF, shall be subject to the civil penalty that
may be assessed under section 502(i) of the Act or 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 (o)
below.
(o)(1) Except as provided in paragraph (o)(2) and notwithstanding
any provisions of section 504(a)(2) and (b) of the Act, the records
referred to in paragraph (n) of this Part III shall be unconditionally
available at their customary location for examination during normal
business hours by:
(i) Any duly authorized employee or representative of the
Department or the Internal Revenue Service;
(ii) Any fiduciary of a Client Plan or any duly authorized employee
or representative of such fiduciary;
(iii) Any contributing employer to a Client Plan or any duly
authorized employee or representative of such employer; and
(iv) Any participant or beneficiary of a Client Plan or any duly
authorized employee or representative of such participant or
beneficiary;
(2) None of the persons described above in paragraph (o)(1)(ii)-
(iv) shall be authorized to examine the trade secrets of RREEF and its
affiliates or any commercial or financial information which is
privileged or confidential.
(p) RREEF shall provide a copy of the proposed exemption and a copy
of the final exemption to all Client Plans that invest in any Single
Client Account or any Multiple Client Account formed on, or after, the
date the final exemption is published in the Federal Register.
Part IV--Definitions
(a) An ``affiliate'' of a person includes:
(1) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control
with the person;
(2) Any officer, director, employee, relative of, or partner of any
such person; and
(3) Any corporation or partnership of which such person is an
officer, director, partner or employee.
(b) The term ``control'' means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.
(c) The term ``management services'' means:
(1) Development of an investment strategy for the Account and
identification of suitable real estate-related investments;
[[Page 42721]]
(2) Directing the investments of the assets of the Account,
including the determination of the structure of each investment, the
negotiation of its terms and conditions and the performance of all
requisite due diligence;
(3) Determination of the timing of, and directing, the disposition
of assets of the Account and directing the liquidation of the Account
upon termination;
(4) Administration of the overall operation of the investments of
the Account, including all applicable leasing, management, financing
and capital improvement decisions;
(5) Establishing and maintaining accounting records of the Account
and distributing reports to Client Plans as described in Part III; and
(6) Selecting and directing all service providers of ancillary
services as defined in this Part IV; provided, however, that some or
all of the foregoing management services may be subject to the final
discretion of the Independent Fiduciary(ies) for the Client Plan(s).
(d) The term ``ancillary services'' means:
(1) Legal services;
(2) Services of architects, designers, engineers, construction
managers, hazardous materials consultants, contractors, leasing agents,
real estate brokers, and others in connection with the acquisition,
construction, improvement, management and disposition of investments in
real property;
(3) Insurance brokerage and consultation services;
(4) Services of independent auditors and accountants in connection
with auditing the books and records of the Accounts and preparing tax
returns;
(5) Appraisal and mortgage brokerage services; and
(6) Services for the development of income-producing real property.
(e) The term ``Independent Fiduciary'' with respect to any Client
Plan means a fiduciary (including an in-house fiduciary) independent of
RREEF and its affiliates. With respect to a Multiple Client Account,
the terms ``Independent Fiduciary'' or ``Responsible Independent
Fiduciaries'' mean the Independent Fiduciaries of the Client Plans
invested in the Account and other authorized persons acting for
investors in the Account which are not employee benefit plans as
defined under section 3(3) of ERISA (such as governmental plans,
university endowment funds, etc.) that are independent of RREEF and its
affiliates, and that collectively hold more than 50% of the interests
in the Account.
(f) The terms ``Threshold Amount'' or ``Hurdle Rate'' mean, with
respect to any Performance Fee, an amount which equals all of a Client
Plan's capital invested in an Account plus a pre-specified annual
compounded cumulative rate of return that is at least a minimum rate of
return determined as follows:
(1) A ``floating'' or non-fixed rate which is at least equal to the
lesser of seven percent, or the rate of change in the consumer price
index (CPI), during the period from the deposit of the Client Plan's
assets into the Account until the determination date; or
(2) A fixed rate which is at least equal to the lesser of seven
percent or the average rate of change in the CPI over some period of
time specified in the Agreement, which shall not exceed 10 years.
(g) The terms ``Net Operating Income'' or ``NOI'' means all
operating income of the Account (i.e., rents, interest, and other
income from day-to-day investment activities of the Account) less
operating expenses, determined on an accrual basis in accordance with
generally accepted accounting principles, but without regard to
depreciation (or other non-cash) expense and capital expenditures and
without regard to payments of interest and principal with respect to
any acquisition indebtedness relating to the property.
(h) The term ``Net Proceeds of a Capital Event'' means all proceeds
from capital events of an Account (i.e., sales or non-recourse
refinances of real property investments owned by the Account) less
repayment of debt with respect to such property, closing expenses paid,
and reasonable reserves established in connection therewith, whether
such reserves are for repayment of existing or anticipated obligations
or for contingent liabilities.
EFFECTIVE DATE: This exemption is effective as of (i) May 16, 1994,
with respect to the Shell Account, and (ii) the date this final
exemption is published in the Federal Register, with respect to any
Single Client Account and any Multiple Client Account formed on, or
after, such date.
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 (the Notice) published on June 3, 1999
at 64 FR 29896.
Written Comments
The Department received one written comment (the Comment) with
respect to the Notice and no requests for a public hearing. The Comment
was filed by RREEF and generally requests clarifications and
modifications to the Notice. Set forth below in section I is RREEF's
discussion concerning RREEF's notification of interested parties.
Section II discusses those aspects of the Comment which relate to the
language of the final exemption (the Exemption). In addition, section
III below discusses those aspects of the Comment which relate to the
Summary of Facts and Representations (the Summary) contained in the
Notice.
I. Discussion Concerning Notification of Interested Persons
RREEF represents that RREEF notified all interested parties of the
Notice by First Class Mail on June 8, 1999, and informed such persons
that they would have thirty-one (31) days from the date of mailing
(i.e., 36 days from the date of the Notice's publication in the Federal
Register) to file comments with the Department. Although the Notice
stated that the comment period would be sixty (60) days from the date
of publication in the Federal Register, it is RREEF's understanding
that the Department's purpose in establishing the 60-day period was to
give RREEF up to 30 days to mail the Notices and to give interested
parties at least thirty (30) days after such mailing to comment. RREEF,
however, did not require the initial 30-day period to mail the Notices
and, after discussion with the Department staff, shortened the overall
time period to reflect the actual date of mailing. All interested
parties retained the 30-day comment period and were advised by RREEF
that the correct comment deadline date would be July 9, 1999.
Notwithstanding the foregoing, RREEF also had an understanding with
the Department that if comments from the general public were received
within a reasonable time after July 9, 1999, the Department would
require RREEF to respond. However, no such comments were received.
The Department acknowledges RREEF's modification of the
notification of interested persons, and, based upon the representations
made by RREEF's counsel, has determined that the notice requirements
contained in the Department's exemption procedures (see 29 CFR 2570.43)
have been met.
II. Discussion Concerning the Exemption
1. Part I of the Exemption states, in relevant part, that the
restrictions of section 406(b)(1) and (b)(2) of the Act and the taxes
imposed by section 4975 of the Code, by reason of section
[[Page 42722]]
4975(c)(1)(E) of the Code, shall not apply, as of the date the final
exemption is published in the Federal Register, to the subject
transactions ``* * * with respect to any single client, separate
account (Single Client Account) or any multiple Client account
(Multiple Client Account) formed on, or after, such a date * * *'' (see
(ii) of Part I). RREEF wishes to confirm that the phrase ``* * * formed
on, or after, such a date * * *'' refers only to Multiple Client
Accounts.
The Department confirms RREEF's understanding of this phrase.
2. Under Part III(i) of the Exemption, a Performance Fee shall be
payable to RREEF after the Client Plan has received distributions from
the Account in excess of the applicable Threshold Amount. Part III(i)
also discusses the possible payment of a Performance Fee to RREEF in
the case of RREEF's removal or resignation, as determined by a deemed
distribution of the assets of the Account based on an assumed sale of
such assets at their market value, but only to the extent that the
Client Plan would receive distributions from the Account in excess of
an amount equal to the Threshold Amount at the time of RREEF's removal
or resignation. In this regard, the Comment relates to the phrase in
Part III(i) which states, in relevant part, that ``* * * the Client
Plan would receive distributions from the Account in excess of an
amount equal to the Threshold Amount at the time of RREEF's removal or
resignation.'' RREEF suggests adding the word ``deemed'' to this phrase
so that Part III(i) reads, in relevant part, ``* * * the Client Plan
would receive deemed distributions from the Account * * *'' [Emphasis
added].
The Department acknowledges RREEF's clarification, and has modified
the language of Part III(i) of the Exemption accordingly.
3. Part IV(f) of the Exemption states, in relevant part, that ``the
terms ``Threshold Amount'' or ``Hurdle Rate'' mean, with respect to any
Performance Fee, an amount which equals all of a Client Plan's capital
invested in an Account plus a pre-specified annual compounded
cumulative rate of return * * *'' RREEF wishes to confirm that it may
use a Hurdle Rate that is compounded more frequently than annually,
e.g., quarterly or monthly, if so negotiated with the Client Plans.
2
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\2\ RREEF also notes references to annual compounding in
Paragraphs 5 and 12 of the Summary.
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The Department acknowledges RREEF's confirmation.
III. Discussion Concerning the Summary
In the Comment, RREEF wishes to clarify the description of the
Performance Fees in the Summary as applied to Single Client Accounts.
RREEF notes that there is a substantial difference between the proposed
Performance Fee calculation as applied to Multiple Client Accounts
(described in Part III(i) of the Notice) and the Fee calculation
applicable to Single Client Accounts (described in Part III(j) of the
Notice). RREEF states that Part III(i) clearly reflects that although
distributions from operations serve to reduce the Threshold Amount with
respect to Multiple Client Accounts, once the Threshold Amount is
reduced to zero the Performance Fee for Multiple Client Accounts is
payable only with respect to subsequent distributions from capital
events. However, Part III(j) of the Exemption provides that the
Performance Fee for Single Client Accounts may be paid ``* * * based on
the sum of all actual distributions from the Account during such
period, plus deemed distributions * * *.''
RREEF represents that the difference in the language was
intentional. In the case of a Multiple Client Account, since periodic
Performance Fees are not available under the Exemption, RREEF states
that it is highly unlikely that any Performance Fee will be calculated
and paid until the Account has reached the end of its term and is in
liquidation.
In contrast, RREEF states that distributions from any source,
including operating revenues, would continue to enter into the
Performance Fee calculation for Single Client Accounts even after the
Threshold Amount is reduced to zero (as reflected in the language of
Part III(j) of the Exemption).
Accordingly, RREEF wishes to make several clarifications to the
information contained in the Summary.
1. Paragraph 5(iii) of the Summary contains a description of the
Performance Fee. RREEF requests that the word ``certain'' be inserted
into Paragraph 5(iii) and that the words ``* * * of capital proceeds''
be deleted such that it reads, in relevant part, ``* * * the
Performance Fee, a fee charged upon certain actual or deemed
distributions from the Account in excess of a Client Plan's invested
capital * * *.'' [Emphasis added].
2. RREEF requests that the phrase ``* * * will not be payable
until'' be substituted for ``will be payable with respect to'' in the
third section of Paragraph 13 of the Notice, such that the sentence
reads, in relevant part, ``Because the Threshold Amount has been
reduced to $0 at year 6, an additional Performance Fee will not be
payable until any subsequent distribution of cash from a capital event
* * *.'' [Emphasis added].
3. RREEF requests that the word ``the'' be deleted in the last
sentence of Paragraph 14 of the Notice, and that the sentence should
read ``* * * Such proceeds, net of these expenses and reserves,
generally will be distributable net proceeds of capital events upon
which the Performance Fee may be payable.''
4. RREEF states it wishes to clarify for the record that because
the calculation of the Shell Account's Performance Fee will be done
retroactively, such Fee will be based solely on actual property sales.
Accordingly, all references in the Summary to appraisals and appraisers
with respect to the Shell Account are irrelevant.
5. RREEF notes that the second section of Paragraph 1 of the
Summary requires certain clarifications. RREEF wishes to clarify this
information as follows (RREEF's modifications are in italic):
``On January 27, 1998, substantially all of the assets of RREEF
America L.L.C. and its affiliate, RREEF Corporation (collectively,
RREEF), were acquired by RoProperty Services, B.V. (RoProperty), a
major Dutch investment advisory firm, now known as RoProperty
Investment Management, N.V. As a result, the assets of RREEF's advisory
entities were combined into a newly created Delaware limited liability
company, which continues to use the name ``RREEF America L.L.C.'' RREEF
operates as an autonomous entity which continues to provide investment
management services, and its affiliate, RREEF Management Company,
continues to provide property management services.'' [Emphasis added].
6. Paragraph 3 of the Summary contains footnote 2 which states:
``* * * The applicant represents that in some instances a Client
Plan's investment in a Multiple Client Account that is a common or
collective trust fund maintained by a bank would be exempt from the
restrictions of section 406(a) of the Act by reason of section
408(b)(8). The Department expresses no opinion herein whether all
the conditions of section 408(b)(8) will be satisfied in such
transactions.''
RREEF states that this footnote, while legally accurate, should be
deleted because it is inapplicable to RREEF since RREEF is not a bank.
7. RREEF requests that in paragraph 3(f) of the Summary, the phrase
``also has'' be changed to ``also may have'' such that the modified
paragraph 3(f) reads as follows:
[[Page 42723]]
``RREEF also may have complete discretion in the selection and
direction of the ancillary services (Ancillary Services) defined in
Part IV, paragraph (d) above.'' [Emphasis added].
8. RREEF wishes to clarify certain information contained in
Paragraph 7 of the Summary, which discusses the services for which
RREEF receives an Asset Management Fee. Specifically, RREEF makes the
following points:
(a) The Asset Management Fee is not intended to compensate RREEF
for selection of properties and other assets for acquisition by an
Account; this service is effectively covered by the Investment Fee.
(b) The Asset Management Fee does not compensate RREEF for
``performance'' (as stated therein) of property management and leasing
services, because such services are provided by separate parties for
separate compensation. However, this Fee does compensate RREEF for
``supervising and overseeing the performance'' of such services,
including the hiring of those separate parties.
(c) RREEF states that the phrase ``* * * and maintaining'' should
be added to section (v) of paragraph 7 so that the modified section
reads as follows: ``establishing and maintaining tax-exempt title-
holding corporations under section 501(a) of the Code for the
properties''. [Emphasis added].
(d) RREEF also states that the Asset Management Fee also covers
supervising the preparation and filing of tax (and other) reports.
9. RREEF also notes that paragraph 8 of the Summary states that
RREEF's current property management agreements permit no more than a
15% variance in individual budget line items and 5% overall. However,
RREEF states that these figures were used as an example and were not
intended to be fixed at such percentages for all property management
agreements. In this regard, it is possible that a Client Plan may
negotiate a lesser variance in the future, or a lesser variance for a
single line item.
RREEF also notes that at the end of the second paragraph in
paragraph 8 of the Summary, the last two sentences should be deleted
and following two sentences substituted in their place:
``Property management agreements used by RREEF permit no more than
a 15% variance between any individual line item expense in the
operating budget and actual expenditures, without the Client's
approval. In addition, without the Client's approval, actual
expenditures for any year typically may not exceed budgeted expenses by
more than 5% in the aggregate.'' [Emphasis added].
In this regard, the Department has also modified the language of
paragraph (h)(3) of Part III as follows:
``* * * (3) In the event of any subsequent decrease in
previously approved budgeted operating expenses for the fiscal year
in excess of the limits previously described (i.e., no more than 15%
for any line item, or 5% overall), then the resulting increase in
NOI * * *.'' [Emphasis added].
10. RREEF also requests that in the last sentence of Paragraph 12
of the Summary, the word ``by'' be replaced by the word ``to'' so that
the sentence reads, in relevant part: * * * the Threshold Amount would
be increased to the full amount of the deemed distribution * * *''
[Emphasis added.]
11. RREEF also requests that the phrase ``* * * either the Client
Plan(s) or'' be added at the beginning of last sentence of paragraph 16
of the Summary to clarify that the discretion used by the appropriate
fiduciaries for an Account, as discussed therein, will be exercised by
someone other than RREEF. Therefore, the revised sentence should have
read as follows:
``Either the Client Plan(s) or the replacement investment
manager of the Account (unrelated to RREEF) will have discretion as
to when the property is sold or when the Account is terminated.''
[Emphasis added].
The Department acknowledges all of RREEF's clarifications to the
information contained in the Summary, as discussed above, as well as
certain other minor discussions and information contained in the
Comment.
Accordingly, after giving full consideration to the entire record,
including the Comment, the Department has decided to grant the
exemption subject as modified herein. The Comment has been included as
part of the public record of the exemption application.
Interested persons are invited to review the complete exemption
file, which is available for public inspection in the Public Disclosure
Room of the Pension and Benefits Administration, Room N-5638, U.S.
Department of Labor, 200 Constitution Avenue, NW., Washington DC 20210.
FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department,
telephone (202) 219-8883. (This is not a toll-free number.)
General Motors Hourly Rate Employees Pension Plan, General Motors
Retirement Program for Salaried Employees, Saturn Individual
Retirement Plan for Represented Team Members, Saturn Personal
Choices Retirement Plan for Non-Represented Team Members,
Employees' Retirement Plan for GMAC Mortgage Corporation, Delphi
Automotive Systems Hourly Rate Employees Pension Plan, Delphi
Automotive Systems Retirement Program for Salaried Employees
(collectively, the Plans) Located in New York, New York
[Prohibited Transaction Exemption 99-33; Exemption Application Nos. D-
10473 through D-10476]
Exemption
Part I--Covered Transactions
The restrictions of section 406(a)(1)(A) through (D) of the Act and
the taxes imposed by section 4975(a) and (b) of the Code, by reason of
section 4975(c)(1)(A) through (D) of the Code, shall not apply
effective December 11, 1998, to a transaction between AEW Industrial,
L.L.C. (the LLC), an entity which currently holds ``plan assets'' of
the Plans, or any subsidiary of the LLC (as defined in Part IV(d)
below) which may hold ``plan assets'' of the Plans in the future, as a
result of investments made by the Plans in the LLC or any subsidiary
through the First Plaza Group Trust (the Trust), and a party in
interest with respect to any of the Plans, provided that the Specific
Conditions set forth below in Part II and the General Conditions set
forth in Part III are met:
Part II--Specific Conditions
(a) In the case of a transaction by the LLC or any subsidiary that
involves the acquisition, financing, or disposition of any real
property asset, the terms of the transaction are negotiated on behalf
of the Plan by AEW Capital Management, L.P. or a successor thereto
(AEW), under the authority and general direction of General Motors
Investment Management Corporation (GMIMCo), a wholly-owned subsidiary
of General Motors Corporation (GM), and GMIMCo makes the decision on
behalf of the Plan to enter into the transaction.
Notwithstanding the foregoing, a transaction involving an amount of
$5 million or more, which has been negotiated on behalf of the Plans by
AEW and approved by GMIMCo in the manner described above, will not fail
to meet the requirements of this Part II(a) solely because GM or its
designee retains the right to veto or approve such transaction;
[[Page 42724]]
(b) In the case of any transaction by the LLC or any subsidiary
that does not involve acquisitions, financings or dispositions of real
property assets, the terms of the transaction are negotiated on behalf
of the Plans by AEW, under the authority and general direction of
GMIMCo, and either AEW or a property manager acting in accordance with
written guidelines or business plans (including budgets), adopted with
the approval of GMIMCo, makes the decision on behalf of the Plans to
enter into the transaction. Notwithstanding the foregoing, a
transaction involving an amount of $5 million or more, which has been
negotiated on behalf of the Plans in accordance with the foregoing,
will not fail to meet the requirements of this Part II(b) solely
because GM or its designee retains the right to veto or approve such
transaction;
(c) The transaction is not described in--
(1) Prohibited Transaction Exemption 81-6 (46 FR 7527, January 23,
1981), relating to securities lending arrangements,
(2) Prohibited Transaction Exemption 83-1 (48 FR 895, January 7,
1983), relating to acquisitions by plans of interests in mortgage
pools, or
(3) Prohibited Transaction Exemption 88-59 (53 FR 24811; June 30,
1988), relating to certain mortgage financing arrangements;
(d) The transaction is not part of an agreement, arrangement or
understanding designed to benefit a party in interest with respect to
any of the Plans;
(e) At the time the transaction is entered into, and at the time of
any subsequent renewal or modification thereof that requires the
consent of GMIMCo, GM, or AEW the terms of the transaction are at least
as favorable to the Plans as the terms generally available in arm's-
length transactions between unrelated parties;
(f) The party in interest dealing with the LLC: (1) is a party in
interest with respect to a Plan (including a fiduciary) solely by
reason of providing services to the Plan, or solely by reason of a
relationship to a service provider described in section
3(14)(F),(G),(H) or (I) of the Act; and (2) does not have discretionary
authority or control with respect to the investment of the Plan's
assets in the Trust or the LLC, and does not render investment advice,
within the meaning of 29 CFR 2510.3-21(c), with respect to the
investment of those assets in the Trust or the LLC;
(g) The party in interest dealing with the LLC is neither GMIMCo or
AEW nor a person ``related'' to GMIMCo or AEW within the meaning of
Part IV(c) below;
(h) GMIMCo adopts written policies and procedures that are designed
to assure compliance with the conditions of this exemption; and
(i) An independent auditor, who has appropriate technical training
or experience and proficiency with the fiduciary responsibility
provisions of the Act, and who so represents in writing, conducts an
exemption audit, as defined in Part IV(f) below, on an annual basis.
Following completion of the exemption audit, the auditor issues a
written report to each Plan representing its specific findings
regarding the level of compliance with the policies and procedure
adopted by GMIMCo in accordance with Part II(h) above.
Part III--General Conditions
(a) At all times during the term of this exemption (if granted),
GMIMCo shall be--
(1) A direct or indirect wholly owned subsidiary of GM, and
(2) An investment adviser registered under the Investment Advisers
Act of 1940 that, as of the last day of its most recent fiscal year,
has under its management and control total assets attributable to Plans
maintained by GM or its affiliates (as defined in Part IV(a) of this
exemption) in excess of $50 million. In addition, Plans maintained by
affiliates of GMIMCo must have, as of the last day of each plan's
reporting year, aggregate assets of at least $250 million;
(b) AEW or any successor, as investment manager for assets held by
the LLC, meets the conditions for a ``qualified professional asset
manager'' (QPAM) as set forth in section V(a) of Prohibited Transaction
Class Exemption 84-14 (49 FR 9494, March 13, 1984);
(c) AEW and GMIMCo, or their affiliates, shall maintain, for a
period of six years from the date of each transaction described above,
the records necessary to enable the persons described below in Part
III(d)(1) to determine whether the conditions of this exemption have
been met, except that (1) a prohibited transaction will not be deemed
to have occurred if, due to circumstances beyond the control of AEW or
GMIMCo, or their affiliates, the records are lost or destroyed prior to
the end of the six-year period, and (2) no party in interest, other
than AEW or GMIMCo, shall be subject to the civil penalty which may be
assessed under section 502(i) of the Act or to the taxes imposed by
sections 4975 (a) and (b) of the Code, if the records are not available
for examination as required by section (d) below; and
(d)(1) Except as provided in subsection (2) of this section (d),
and notwithstanding any provisions of subsection (a)(2) and (b) of
section 504 of the Act, the records referred to in section (c) of this
Part III shall be made unconditionally available by GMIMCo or AEW, at
the customary location for the maintenance and/or retention of such
records, for examination during normal business hours by:
(A) Any duly authorized employee or representative of the
Department of Labor or the Internal Revenue Service;
(B) The persons described in Part II(i) of this exemption (relating
to an independent audit of covered transactions as discussed therein);
and
(C) Any fiduciary of the Plans or the Trust;
(2) None of the persons described in subsections (1)(B) and (C) of
this section (d) shall be authorized to examine trade secrets of AEW or
GMIMCo, or commercial or financial information which is privileged or
confidential in nature.
Part IV--Definitions
For purposes of this exemption:
(a) ``Affiliate'' of GM means a member of either (1) a controlled
group of corporations (as defined in section 414(b) of the Code) of
which GM is a member, or (2) a group of trades or businesses under
common control (as defined in section 414(c) of the Code) of which GM
is a member; provided that ``50 percent'' shall be substituted for ``80
percent'' wherever ``80 percent'' appears in Code section 414(b) or
414(c) or the regulations thereunder.
(b) ``Party in interest'' means a person described in section 3(14)
of the Act and includes a ``disqualified person'' as defined in section
4975(e)(2) of the Code.
(c) GMIMCo or AEW are ``related'' to a party in interest with
respect to a Plan for purposes of this exemption if the party in
interest (or a person controlling or controlled by the party in
interest) owns a five percent (5%) or more interest in GMIMCo or AEW,
or if GMIMCo or AEW (or a person controlling or controlled by GMIMCo or
AEW) owns a five percent (5%) or more interest in the party in
interest. For purposes of this definition:
(1) ``Interest'' means with respect to ownership of an entity:
(A) The combined voting power of all classes of stock entitled to
vote, or the total value of the shares of all classes of stock of the
entity, if the entity is a corporation;
(B) The capital interest, or the profits interest of the entity, if
the entity is a partnership; or
[[Page 42725]]
(C) The beneficial interest of the entity, if the entity is a trust
or unincorporated enterprise;
(2) A person is considered to own an interest held in any capacity
if the person has or shares the authority--
(A) To exercise any voting rights or to direct some other person to
exercise the voting rights relating to such interest, or
(B) To dispose or to direct the disposition of such interest; and
(3) ``Control'' means the power to exercise a controlling influence
over the management or policies of a person other than an individual.
(d) ``Subsidiary'' means any limited liability company or other
entity organized by the LLC, through which it acquires and holds title
to its real property investments.
(e) An ``exemption audit'' of each Plan's interest in the LLC must
consist of the following:
(1) A review of the written policies and procedures adopted by
GMIMCo pursuant to Part II(h) for consistency with each of the
objective requirements of this exemption (as described herein);
(2) A test of a representative sample of the Plan's transactions
through investments made by the LLC, as described in Part I, in order
to make findings regarding whether GMIMCo is in compliance with both:
(i) the written policies and procedures adopted by GMIMCo pursuant to
Part II(i) of this exemption; and (ii) the objective requirements of
this exemption; and
(3) Issuance of a written report describing the steps performed by
the independent auditor during the course of its review and the
independent auditor's findings regarding the Plan's interest in the
LLC.
(f) For purposes of Part IV(e), the written policies and procedures
must describe the following objective requirements of Part II of the
exemption and the steps adopted by GMIMCo to assure compliance with
each of these requirements:
(1) The requirements of Part III;
(2) The requirements of sections (a) and (b) of Part II regarding
the discretionary authority or control of GMIMCo with respect to the
Plan assets involved in each transaction, in negotiating the terms of
the transaction, and with regard to the decision made on behalf of the
Plan, as an investor in the LLC, to enter into the transaction;
(3) The requirements of sections (a) and (b) of Part II with
respect to any procedure for approval or veto of the transaction;
(4) That:
(A) The transaction is not entered into with any person who is
excluded from relief under sections (f) or (g) of Part II; and
(B) The transaction is not described in any of the class exemptions
listed in section (c) of Part II.
(g) ``Plan'' means an employee benefit plan established and
maintained by GM or an Affiliate, as well as the Delphi Automotive
Systems Hourly Rate Employees Pension Plan, and the Delphi Automotive
Systems Retirement Program for Salaried Employees.
EFFECTIVE DATE: This exemption is effective as of December 11, 1998.
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 (the Notice) published on June 3, 1999
at 64 FR 29914.
Written Comments
The Department received one written comment (the Comment) with
respect to the Notice and no requests for a public hearing. The Comment
was filed by AEW and suggests that certain clarifications and
modifications be made to the Notice. Set forth below in section I is
AEW's discussion concerning the language of the final exemption (the
Exemption). Section II discusses those aspects of the Comment which
relate to the Summary of Facts and Representations (the Summary)
contained in the Notice.
I. Discussion of the Comment Regarding the Exemption
1. AEW states that Delphi Automotive Systems Corporation (Delphi)
was spun-off by General Motors on May 28, 1999. Delphi maintained two
plans, the Delphi Automotive Systems Hourly Rate Employees Pension Plan
and the Delphi Automotive Systems Retirement Program for Salaried
Employees. The assets of both of these plans are still held in the
First Plaza Group Trust and still managed by GMIMCo. Therefore, AEW
requests that the Delphi Automotive Systems Hourly Rate Employees
Pension Plan and the Delphi Automotive Systems Retirement Program for
Salaried Employees be added to the caption of the Exemption, so that
the revised caption reads as follows:
``General Motors Hourly Rate Employees Pension Plan, General
Motors Retirement Program for Salaried Employees, Saturn Individual
Retirement Plan for Represented Team Members, Saturn Personal
Choices Retirement Plan for Non-Represented Team Members, Employees'
Retirement Plan for GMAC Mortgage Corporation, Delphi Automotive
Systems Hourly Rate Employees Pension Plan, Delphi Automotive
Systems Retirement Program for Salaried Employees (collectively, the
Plans).'' [Emphasis added].
The Department acknowledges AEW's request and has modified the
caption of the Exemption accordingly. In addition, the Department has
modified the definition of the term ``Plan'' in Part IV(g) of the
Exemption to include the Delphi Automotive Systems Hourly Rate
Employees Pension Plan, and the Delphi Automotive Systems Retirement
Program for Salaried Employees.
2. AEW also notes that Part I of the Notice states, in relevant
part, that the restrictions of section 406(a)(1)(A) through (D) of the
Act, and the taxes imposed by section 4975(a) and (b) of the Code,
shall not apply to ``* * * a transaction between AEW Industrial, L.L.C.
(the LLC), an entity which currently holds ``plan assets'' of the
Plans, or any subsidiary of the LLC (as defined in Part IV(d) below) *
* *'' Since Part I refers to transactions by the LLC or any subsidiary,
AEW requests that the phrase ``* * * or any subsidiary * * *'' also be
added immediately after the reference to the LLC in the first sentence
of Part II(a) of the Exemption and the first sentence of Part II(b) of
the Exemption in order to be consistent with Part I.
Thus, Part II(a) should read, in relevant part, ``In the case of
transaction by the LLC or any subsidiary * * *.'' [Emphasis added].
Furthermore, Part II(b) should read, in relevant part, ``In the case of
transaction by the LLC or any subsidiary * * *.'' [Emphasis added].
The Department acknowledges AEW's request and has modified the
language of Part II(a) and Part II(b) of the Exemption accordingly.
II. Discussion of the Comment Regarding the Summary
1. For the same reasons discussed in the Comment at Section I(1)
above, AEW states that the following sentence should be added after the
first sentence in paragraph 2 of the Summary, so that the paragraph
reads, in relevant part:
``For a portion of their assets, the Plans make investments
through an entity known as the First Plaza Group Trust (i.e., the
Trust), which is a group trust established pursuant to IRS Revenue
Ruling 81-100. In addition, the Delphi Automotive Systems Hourly
Rate Employees Pension Plan and the Delphi Automotive Systems
Retirement Program for Salaried Employees (hereinafter these two
plans are included in all references to the Plans), which are plans
sponsored by a former GM affiliate, make investments through the
Trust.'' [Emphasis added].
2. AEW requests that the word ``billion'' replace the word
``million'' in the last sentence of paragraph 1 of the Summary so that
the sentence reads, in
[[Page 42726]]
relevant part, ``* * * the Plans had total assets of approximately
$73.2 billion, of which approximately $4.39 billion were invested in
private real estate assets.'' [Emphasis added].
3. AEW also requests that the word ``billion'' replace the word
``million'' in the third sentence of paragraph 5 of the Summary so that
the sentence reads, in relevant part, ``* * * [New England Investment
Companies] NEIC is a publicly-traded holding company with approximately
$90 billion in assets under management * * *.'' [Emphasis added].
The Department acknowledges all of AEW's clarifications to the
information contained in the Summary.
Accordingly, after giving full consideration to the entire record,
including the Comment, the Department has decided to grant the
exemption subject as modified herein.
FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan 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 exemption 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 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 2nd day of August, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 99-20191 Filed 8-4-99; 8:45 am]
BILLING CODE 4510-29-P
