Employee Benefits Security Administration, Labor.
Grant of individual exemptions.
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).
A notice was published in the Federal Register of the pendency before the Department of a proposal to grant such exemption. The notice set forth a summary of facts and representations contained in the application for exemption and referred interested persons to the application for a complete statement of the facts and representations. The application has been available for public inspection at the Department in Washington, DC. The Start Printed Page 5702notice also invited interested persons to submit comments on the requested exemption to the Department. In addition the notice stated that any interested person might submit a written request that a public hearing be held (where appropriate). The applicant has represented that it has complied with the requirements of the notification to interested persons.
No requests for a hearing were received by the Department. Public comments were received by the Department as described in the granted exemption.
The notice of proposed exemption was issued and the exemption is being granted solely by the Department because, effective December 31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the Secretary of the Treasury to issue exemptions of the type proposed to the Secretary of Labor.
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 exemption is administratively feasible;
(b) The exemption is in the interests of the plan and its participants and beneficiaries; and
(c) The exemption is protective of the rights of the participants and beneficiaries of the plan.
J.C.O., Inc. Retirement Plan and Trust (the Plan)
Located in Boulder, Colorado
[Prohibited Transaction Exemption 2005-01; Exemption Application No. D-11211]
The restrictions of sections 406(a), 406(b)(1) and 406(b)(2) of the Act and the sanctions resulting from the application of section 4975 of the Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall not apply to (1) the cash sale (the Sale) of certain improved real property (the Property) to the Plan by Cynthia G. Vogels, a party in interest with respect to the Plan and a 50% shareholder of J.C.O., Inc. (JCO), the Plan sponsor; and (2) the simultaneous lease (the New Lease) of the Property by the Plan to JCO.
This exemption is subject to the following conditions:
(a) The terms and conditions of the transactions are not less favorable to the Plan than those obtainable in an arm's length transaction between unrelated parties.
(b) The Sale is a one-time transaction for cash.
(c) The acquisition price that is paid by the Plan for the Property is not more than the fair market value of the Property as determined by a qualified, independent appraiser on the date of the Sale.
(d) The value of the Property that is acquired by the Plan does not exceed 20% of the Plan's assets at the time of the Sale nor throughout the duration of the New Lease.
(e) The Plan does not pay any real estate fees, commissions or other expenses with respect to the transactions.
(f) Mrs. Vogels indemnifies and holds the Plan harmless from any liability arising from the Sale, including but not limited to hazardous materials found on the Property, violation of zoning or land use regulations or restrictions, and violations of federal, state or local environmental regulations or laws.
(g) The New Lease is a triple-net lease under which the JCO, as lessee, pays, in addition to the base rent, all expenses incurred by the Property, including all taxes and assessments, insurance, maintenance, utilities and any other expenses.
(h) The annual rental amount under the New Lease is the higher of $40,800 or the fair market rental value of the Property, as determined by a qualified, independent appraiser on the date the New Lease is entered into by the parties.
(i) The rent payable under the New Lease is adjusted every year after the first 12 months of the New Lease by an amount equal to the percentage increase in the Consumer Price Index for All Urban Consumers for the Denver Metropolitan Area. In addition, the Property is reappraised every five years by a qualified, independent appraiser selected by the Plan's independent fiduciary and the independent fiduciary then adjusts the rental for the Property based on the appraisal. However, in no event is the rent adjusted below the rental amount paid for the preceding year.
(j) The Plan is represented at all times and for all purposes with respect to the Sale and the New Lease by a qualified, independent fiduciary.
(k) The Plan's independent fiduciary has negotiated, reviewed, and approved the terms and conditions of the Sale and the New Lease and has determined that the transactions are appropriate for the Plan and in the best interests of the Plan's participants and beneficiaries.
(l) The Plan's independent fiduciary monitors and enforces compliance with the terms and conditions of the New Lease and this exemption throughout the duration of the New Lease.
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 November 30, 2004 at 69 FR 69621.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Ms. Anna M.N. Mpras of the Department, telephone (202) 693-8565. (This is not a toll-free number.)
Roy A. Herberger Defined Benefit Pension Plan (the Plan)
Located in Phoenix, Arizona
[Prohibited Transaction Exemption No. 2005-02; Application No. D-11259]
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 three past in-kind contributions (the Contribution(s)) to the Plan of common stock (the Stock) of Pinnacle West Capital Corporation (PNW) by Roy A. Herberger, Jr. (the Applicant), a disqualified party with respect to the Plan, provided that the following conditions are met:
(a) The transactions involved publicly traded securities, the fair market values of which were based upon published prices at the time of each Contribution;
(b) The cumulative value of the Contributions represented no more than 18% of the total assets of the Plan;
(c) The Plan has not paid any commissions, costs or other expenses in connection with the Contributions;
(d) The Applicant, who is the only person affected by the transactions, believes that the transactions were in the best interest of the Plan;
(e) The Applicant made the Contributions based on erroneous advice from his tax adviser; and
(f) The terms of the transactions between the Plan and the Applicant are no less favorable to the Plan than terms negotiated at arm's length under similar circumstances between unrelated third parties.Start Printed Page 5703
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 November 8, 2004 at 69 FR 64787.End Further Info Start Further Info
FOR FURTHER INFORMATION CONTACT:
Khalif Ford of the Department, telephone (202) 693-8540 (this is not a toll-free number).
The National Electrical Benefit Fund (the Plan)
Located in Rockville, MD
[Prohibited Transaction Exemption 2005-03; Exemption Application No. D-11165]
The restrictions of section 406(a)(1)(A) through (D) 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 (D) of the Code, shall not apply, effective April 1, 2003, to (1) the collateral assignment (the Collateral Assignment) by the Plan, of its rights and interests in the Stonegate at Bellefaire, LLC (the LLC), a real estate operating company, to M&T Real Estate, Inc. (the Senior Lender), a party in interest with respect to the Plan; and (2) the guaranty (the Guaranty) by the Plan, executed in favor of the Senior Lender, requiring the Plan to reimburse the Senior Lender for any losses the Senior Lender may incur as a result of certain affirmative “bad acts” that are committed by the Plan as a member (the Member) of the LLC.
This exemption is subject to the following conditions:
(a) The Plan's execution of the Collateral Assignment and the Guaranty was on terms no less favorable to the Plan than those which the Plan could obtain in an arm's length transaction with an unrelated party;
(b) The decisions on behalf of the Plan to invest in the LLC and consent to the terms of the Collateral Assignment and Guaranty in favor of the Senior Lender were made by fiduciaries which were independent of and unaffiliated with the Senior Lender;
(c) At the time of the transactions, the Plan had total assets that were in excess of $5 billion, and not more than 1% of the Plan's total assets was invested or will be invested in the LLC.
(d) The other Member of the LLC also executed Guaranties in favor of the Senior Lender;
(e) As a Member of the LLC, the Plan's total potential liability with respect to its investment in the real estate project (the Project), which is being developed and will be owned by the LLC, is limited to:
(1) Capital contributions made by the Plan to the LLC.
(2) Amounts funded by the Plan to the LLC.
(3) Rights and interests given to the Senior Lender under the Collateral Assignment.
(f) In the event the Plan engages in any of the specified “bad acts” that are described in the Guaranty, the Plan's total potential liability does not exceed the greater of $32.98 million or the outstanding principal amount of the loan serving as the primary funding vehicle for the Project.End Further Info
This exemption will be effective as of April 1, 2003.
For a 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 November 8, 2004 at 69 FR 64784.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Mr. Arjumand A. Ansari of the Department, telephone (202) 693-8566. (This is not a toll-free number.)
Wheeling-Pittsburgh Corporation and Wheeling Pittsburgh Steel Corporation
Located in Wheeling, WV
[Prohibited Transaction Exemption 2005-04; Application No. L-11200]
The restrictions of sections 406(a)(1)(E), 407(a)(2), 406(b)(1), and 406(b)(2) of the Act, shall not apply to: (1) The initial acquisition of 4,000,000 shares on August 1, 2003 (Initial Shares) of publicly traded Employer Stock through the in-kind contribution of such Initial Shares, and subsequent in-kind acquisitions of Employer Stock, by the Wheeling-Pittsburgh Steel Corporation Retiree Benefits Plan (the Plan) for the purpose of pre-funding welfare benefits provided by the Plan; and (2) the holding by the Plan of Employer Stock acquired pursuant to the contributions, provided that the following conditions are satisfied:
(a) An Independent Fiduciary will represent the Plan and its participants and beneficiaries for all purposes related to such contributions for the duration of the Plan's holding of such Employer Stock and will have sole responsibility relating to the acquisition, holding, disposition, ongoing management, and voting of Employer Stock. The Independent Fiduciary will authorize the Trustee to accept or dispose of Employer Stock only after such Independent Fiduciary determines, at the time of each transaction, that such transaction is feasible, in the interest of the Plan, and protective of the participants and beneficiaries of such Plan, subject to the terms of the Registration Rights Agreement, Stock Transfer Restriction and Voting Agreement;
(b) The appropriate fair market value of any Employer Stock contributed by WPC and WPSC to the Trust will be established by the Independent Fiduciary;
(c) The Plan or Trust incurs no fees, costs or other charges (other than those described in the Engagement Letter Agreement and the Trust Agreement) as a result of any of the transactions described herein;
(d) The terms of any transactions between the Plan and the Companies will be no less favorable to the Plan than terms negotiated at arm's length under similar circumstances between unrelated third parties;
(e) Employer Stock contributed in-kind to the Plan will be held in a separate account under a Trust which is qualified under section 501(c)(9) of the Code;
(f) The Committee maintains, for a period of six years from the date of the initial acquisition of shares by the Plan and from the date of any subsequent contributions of Employer Stock, any and all records necessary to enable the persons described in paragraph (g) below to determine whether the conditions of this exemption have been met, except that: (1) If the records necessary to enable the persons described in paragraph (g) to determine whether the conditions of the exemption have been met are lost or destroyed, due to circumstances beyond the control of the plan fiduciary, then no prohibited transaction will be considered to have occurred solely on the basis of unavailability of those records; and (2) no party in interest other than the Committee shall be subject to the civil penalty that may be assessed under section 502(i) of the Act if the records are not maintained, or are not available for examination as required by paragraph (g) below;
(g)(1) Except as provided below in paragraph (g)(2) and notwithstanding any provisions of subsections 504(a)(2) and (b) of the Act, the records referred to in paragraph (f) above shall be unconditionally available at their customary location for examination during normal business hours by:
(A) Any duly authorized employee or representative of the Department;
(B) The USWA or any duly authorized representative of the USWA; and
(C) Any participant or beneficiary of the Plan, or any duly authorized Start Printed Page 5704representative of such participant or beneficiary.
(2) None of the persons described above in subparagraphs (B) and (C) of this paragraph (g) shall be authorized to examine the trade secrets of WPC or WPSC or commercial or financial information that is privileged or confidential.
(a) For purposes of this exemption, the term “Independent Fiduciary” means a fiduciary with respect to the Plan who is: (1) Independent of and unrelated to WPC, WPSC or its affiliates; and (2) appointed to act on behalf of the Plan with respect to the acquisition, holding, management, and disposition of the shares. In this regard, the fiduciary will not be deemed to be independent of and unrelated to WPC and WPSC if: (1) Such fiduciary directly or indirectly controls, is controlled by or is under common control with WPC or WPSC; (2) such fiduciary directly or indirectly receives any compensation or other consideration in connection with any transaction described in this exemption; except that the Independent Fiduciary may receive compensation for acting as an Independent Fiduciary from WPC in connection with the transactions contemplated herein if the amount or payment of such compensation is not contingent upon or in any way affected by the Independent Fiduciary's ultimate decision, and (3) the annual gross revenue received by the Independent Fiduciary, during any year of its engagement, from WPC exceeds one percent (1%) of the Independent Fiduciary's annual gross revenue from all sources (for federal income tax purposes) for its prior tax year;
(c) The term “Initial Shares” means the 4,000,000 shares of common stock of WPC that were contributed to the Trust on August 1, 2003.
(d) The term “Participant” shall mean former employees of WPC, WPSC and its subsidiaries who separated from service from USWA-represented bargaining units and who are designated as beneficiaries of the newly-created WPSC Retiree Benefit Plan, as well as any dependent, surviving spouse or other beneficiary of a bargaining unit retiree who is entitled to receive benefits under the Plan.
(e) The term “Plan” refers to the Wheeling-Pittsburgh Steel Corporation Retiree Benefits Plan. The Plan is an employee welfare benefit plan established and maintained by the Committee.
(f) The term “Shares” or “Employer Stock” means shares of publicly traded common stock of WPC.
(g) The term “Trust” means a Code section 501(c)(9) trust, which is established for the purpose of funding life, sickness, accident, and other welfare benefits for the participants and beneficiaries of the Plan.
(h) “USWA” shall mean the United Steelworkers of America, AFL-CIO-CLC.
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 November 30, 2004, at 69 FR 69623.
Written Comments: The applicant (i.e., WPSC) submitted written comments with respect to the notice of the proposed exemption (the Proposal). The comments are summarized below.
The applicant requests that the third transaction described in the first paragraph in the proposed Exemption, which refers to “the extension of credit between Wheeling Pittsburgh Corporation (WPC), Wheeling-Pittsburgh Steel Corporation (WPSC) and the Plan, which will occur in conjunction with WPC's and WPSC's contributions of Employer Stock and cash for the benefit of the retirees,” be omitted due to the absence of an extension of credit in connection with the contributions of Employer Stock. The Department acknowledges the applicant's comment and has revised the grant accordingly.
The applicant states that information concerning the Independent Fiduciary managing Employer Stock that is contributed to the Plan, subject to the provisions of the Independent Fiduciary Engagement Agreement, the Stock Agreement and the Registration Rights Agreement was not included in Item 6 of the Summary of Facts and Representations contained in the proposal (the Summary) in describing the responsibilities of the Independent Fiduciary. The Department acknowledges the applicant's clarifications to the information contained in the Summary.
In addition, the applicant states that the fifth paragraph in Item 6 of the Summary indicates that “the Independent Fiduciary sold 42,000 shares of Employer Stock from March 25, 2004 to April 20, 2004” and should have indicated that the Independent Fiduciary actually sold 42,400 shares during this period. The Department acknowledges the applicant's clarifications to the information contained in the Summary.
The Department received four written inquiries and close to one hundred telephone calls concerning the Proposal from interested persons. All of the telephone calls and written inquiries requested additional information regarding the transactions and the possible affect on benefits payable to the appropriate Plan participants. The Department responded to each inquiry by telephone and attempted to address the issues that were raised. None of the additional comments made to the Department offered specific suggestions or reasons for changes to the proposal.
The Department received no other comments. Accordingly, the Department has determined to grant the exemption, as modified herein.End Further Info Start Further Info
FOR FURTHER INFORMATION CONTACT:
Brian J. Buyniski of the Department, telephone (202) 693-8545. (This is not a toll-free number).
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) This exemption is 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 this exemption is subject to the express condition that the material facts and representations contained in the application accurately describes all material terms of the transaction which is the subject of the exemption.Start Signature
Signed at Washington, DC, this 31st day of January, 2005.
Director of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor.
1. For purposes of this exemption, references to provisions of Title I of the Act, unless otherwise specified, refer also to corresponding provisions of the Code.Back to Citation
[FR Doc. 05-2078 Filed 2-2-05; 8:45 am]
BILLING CODE 4510-29-P