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Notice

Exemptions From Certain Prohibited Transaction Restrictions

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Information about this document as published in the Federal Register.

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AGENCY:

Employee Benefits Security Administration, Labor.

ACTION:

Grant of individual exemptions.

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 (ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). This notice includes the following: 2017-01, Rosetree & Company 401(k) Plan and Trust, D-11845; and 2017-02, Aon Pension Plan, D-11880.

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SUPPLEMENTARY INFORMATION:

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 notice 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.

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 (76 FR 66637, 66644, October 27, 2011) [1] 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.

Rosetree & Company 401(k) Plan and Trust (the Plan) Located in Skokie, IL

Exemption

Section I. Covered Transactions

The sanctions resulting from the application of section 4975(c)(1)(B) of the Code shall not apply to the guarantee (the Guarantee) by Richard Rosenbaum (Mr. Rosenbaum), the Plan trustee, a disqualified person with respect to the Plan, of: (1) A loan (the Loan) made by the Great Lakes Credit Union (GLCU), an unrelated third party lender, to Kurtson Realty, LLC (Kurtson), a real estate company that is wholly owned by the Plan; [2] and (2) a future Loan made by an unrelated third party lender (hereinafter, GLCU and any third party lender is referred to as a “Lender”) to Kurtson, provided that the general conditions that are set forth below in Section II are satisfied.

Section II. General Conditions

(a) The Loan is made for purposes of the Plan acquiring and rehabilitating investment property from an unrelated third party through Kurtson;

(b) The Loan is made on commercially reasonable terms;

(c) The debt service and value to loan ratio for the Loan, and for any future Loan, are based primarily on the characteristics of the property serving as collateral for such Loan (the Collateral Property);

(d) The Lender and the Loan servicer (the Loan Servicer) are unrelated to Mr. Rosenbaum and the Plan;

(e) The Lender has a pre-existing Loan service arrangement with the Loan Servicer, and maintains this relationship for the duration of the Loan;

(f) Mr. Rosenbaum does not receive any compensation or derive any personal benefit from the Collateral Property;

(g) For the duration of the Loan or any future Loan, the Collateral Property is not used by or leased to: (1) Any other disqualified persons with respect to the Plan; (2) Rosetreee or any affiliate of Rosetree; or (3) any person or entity in which Mr. Rosenbaum may have an interest that would affect his best judgment as a Plan fiduciary;Start Printed Page 29332

(h) The Guarantee is a condition that is: (1) Customarily required in similar transactions between Kurtson and the Lender, and is not unique to the Loan or to the specific parties to the Loan; and (2) solely due to a regulatory requirement of the National Credit Union Administration that is imposed upon credit unions, including GLCU;

(i) If the Plan defaults on a Loan, Mr. Rosenbaum pays the balance of such Loan, and has no recourse against the Plan for repayment;

(j) No interest or any fee is charged to Kurtson or the Plan in connection with the Guarantee; and

(k) The Guarantee is not part of an agreement, arrangement, or understanding in which Mr. Rosenbaum causes the assets of the Plan to be used in a manner that is designed to benefit himself or any person who has an interest which would affect the exercise of Mr. Rosenbaum's best judgment as a fiduciary of the Plan.

Written Comments

Because Mr. Rosenbaum is the sole participant and beneficiary of the Plan, the Department determined that there was no need to distribute, to interested persons, the Notice of Proposed Exemption (the Notice), which was published in the Federal Register on May 1, 2017 at 82 FR 20384. All comments were due by May 31, 2017.

During the comment period, the Department received no comments from interested persons. Accordingly, after giving full consideration to the entire record, the Department has decided to grant the exemption. The complete application file (Exemption Application No. D-11845) and all supplemental submissions received by the Department are available for public inspection in the Public Disclosure Room of the Employee Benefits Security Administration, Room N-1513, U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210.

For a more complete statement of the facts and representations supporting the Department's decision to grant this exemption, refer to the Notice cited above.

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FOR FURTHER INFORMATION CONTACT:

Ms. Anna Mpras Vaughan of the Department, telephone (202) 693-8565. (This is not a toll-free number.)

Aon Pension Plan (the Plan) Located in Chicago, Illinois

Exemption

Section I. Covered Transaction

The restrictions of sections 406(a)(1)(A), 406(a)(1)(D), 406(b)(1) and 406(b)(2) of the Act (or ERISA) and the sanctions resulting from the application of section 4975 of the Code, by reason of section 4975(c)(1)(A),(D), and (E) of the Code,[3] shall not apply to the in-kind contribution (the Contribution) by Aon Corporation (Aon), to the Plan of a 3.5% limited partnership interest (the Partnership Interest) in the Trident V, L.P. Fund (the Fund).

Section II. General Conditions

(a) A qualified independent fiduciary (the Independent Fiduciary), as defined in Section IV(c), negotiates the terms and conditions of the Contribution, and approves the Contribution as being in the interest of the Plan;

(b) The Partnership Interest is contributed to the Plan by Aon at its current fair market value, as determined by the Independent Fiduciary, at the time of the Contribution;

(c) On a date preceding the Contribution, Aon made a cash contribution to the Plan of $7.5 million (the Additional Cash Contribution);

(d) The Plan does not have any obligation to make future payments with respect to the Partnership Interest;

(e) Aon contributes, on behalf of the Plan, cash amounts that are equal to the remaining capital calls that are requested by the general partner (the General Partner) of the Fund with respect to the Partnership Interest;

(f) The Plan does not pay any fees, commissions, costs or other expenses in connection with the either the Contribution or the Additional Cash Contribution, except for fees that are paid by the Plan to the Independent Fiduciary; and

(g) The terms and conditions of the Contribution and the Additional Cash Contribution are no less favorable to the Plan than those obtainable under similar circumstances when negotiated at arm's-length with unrelated third parties.

Section III. Independent Fiduciary

(a) The Independent Fiduciary represents the interests of the Plan for all purposes with respect to the Contribution and the Additional Cash Contribution;

(b) The Independent Fiduciary:

(1) Reviews, negotiates (if applicable), and approves the terms and conditions of the Contribution and the Additional Cash Contribution, as evidenced in the Contribution Agreement;

(2) Determines, in its sole discretion, that the reported value of the Partnership, as calculated by the General Partner, reflects the fair market value of the Partnership Interest;

(3) Determines, at the time of the Contribution, that the terms of such transaction are no less favorable to the Plan than the terms negotiated at arm's-length under similar circumstances between unrelated third parties;

(4) Ensures the Plan incurs no fees, costs or other charges (other than the fees and expenses of the Independent Fiduciary) as a result of the Contribution and the Additional Cash Contribution;

(5) Acknowledges that the Partnership Interest may not be sold, assigned, transferred or otherwise disposed of without the prior written consent of the General Partner of the Fund, which must be given at least 30 days prior to such transfer;

(6) Enforces the Plan's rights and interests with respect to the terms the Contribution and the Additional Cash Contribution; and

(7) Takes all steps that are necessary and proper to protect the Plan under the terms of the Contribution Agreement.

Section IV. Definitions

(a) The term “Aon” means Aon Corporation, and any of its affiliates.

(b) The term “affiliate” means:

(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, or partner in any such person; or

(3) Any corporation or partnership of which such person is an officer, director, partner, or employee.

For purposes of clause (b)(1), above, 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 “Independent Fiduciary” means a fiduciary with respect to the Plan that is independent of or unrelated to Aon, and has the appropriate training, experience, and facilities to act on behalf of the Plan regarding the proposed transactions in accordance with the fiduciary duties and responsibilities prescribed by the Act (including, if necessary, the Start Printed Page 29333responsibility to seek the counsel of knowledgeable advisors to assist in its compliance with the Act). The Independent Fiduciary will not be deemed to be independent of and unrelated to Aon if: (1) Such Independent Fiduciary directly or indirectly controls, is controlled by or is under common control, with Aon; (2) such Independent Fiduciary directly or indirectly receives any compensation or other consideration in connection with any transaction described in this exemption other than for acting as Independent Fiduciary in connection with the transactions described herein, provided that 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 from Aon, during any year of its engagement, does not exceed three percent (3%) of such Independent Fiduciary's annual gross revenue from all sources (for federal income tax purposes) for its prior tax year.

Effective Date: This exemption is effective as of the date of the Contribution.

Written Comments

In the notice of proposed exemption (the Notice), the Department invited all interested persons to submit written comments within 44 calendar days of the publication, on April 14, 2017, of the Notice in the Federal Register. All comments were due by May 28, 2017. During the comment period, the Department received three written comments from Plan participants, one comment from Evercore Trust Company (Evercore), the Independent Fiduciary described in the Notice, and one comment from Aon. The Department did not receive any requests for a public hearing. The comments and the Department's responses are discussed below.

Participant Comments

With respect to the comments received from the Plan participants, the first commenter thought the Contribution would “undermine the soundness of the pension plan.” The second commenter thought the Contribution would “jeopardize pension payments.” The third commenter was concerned that the exemption was contrary to the intent of ERISA in that it would not “protect pension funds.” Each commenter's concerns were allayed following a discussion with a Department representative, and the comments were withdrawn.

Evercore's Comment/Appointment of Successor Independent Fiduciary

Evercore informed the Department that its parent, Evercore Partners, had entered into an agreement to sell Evercore's independent fiduciary business to the Newport Group, and that the transaction would close by the end of the third quarter of 2017. Evercore also informed the Department that the Fund currently owns a majority interest in the Newport Group. Evercore represents it had no prior knowledge of the contemplated sale at the time its initial Independent Fiduciary Report was submitted to the Department.

On June 16, 2017, Brock Fiduciary Services LLC of New York, New York was appointed as the new Independent Fiduciary for the Plan. The Department has revised the definition of the term “Independent Fiduciary” to read as follows:

(c) The term “Independent Fiduciary” means a fiduciary with respect to the Plan that is independent of or unrelated to Aon, and has the appropriate training, experience, and facilities to act on behalf of the Plan regarding the proposed transactions in accordance with the fiduciary duties and responsibilities prescribed by the Act (including, if necessary, the responsibility to seek the counsel of knowledgeable advisors to assist in its compliance with the Act). The Independent Fiduciary will not be deemed to be independent of and unrelated to Aon if: (1) Such Independent Fiduciary directly or indirectly controls, is controlled by or is under common control, with Aon; (2) such Independent Fiduciary directly or indirectly receives any compensation or other consideration in connection with any transaction described in this exemption other than for acting as Independent Fiduciary in connection with the transactions described herein, provided that 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 from Aon, during any year of its engagement, does not exceed three percent (3%) of such Independent Fiduciary's annual gross revenue from all sources (for federal income tax purposes) for its prior tax year.

Aon's Comment

Aon requests that the effective date of the exemption be the date the Contribution occurs, which Aon expects will be July 1, 2017. The Department has made the requested revision.

After giving full consideration to the entire record, the Department has decided to grant the exemption. The complete application file (Exemption Application No. D-11880), all supplemental submissions, and the written comments received by the Department are available for public inspection in the Public Disclosure Room of the Employee Benefits Security Administration, Room N-1513, U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210.

For a more complete statement of the facts and representations supporting the Department's decision to grant this exemption, refer to the Notice at 82 FR 18013, April 14, 2017.

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FOR FURTHER INFORMATION CONTACT:

Mrs. Blessed Chuksorji-Keefe of the Department, telephone (202) 693-8567. (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 the application accurately describes all material terms of the transaction which is the subject of the exemption.

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Signed at Washington, DC, this 21st day of June, 2017.

Lyssa E. Hall,

Director of Exemption Determinations, Employee Benefits Security Administration, U.S. Department Of Labor.

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Footnotes

1.  The Department has considered exemption applications received prior to December 27, 2011 under the exemption procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990).

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2.  Because Mr. Rosenbaum is the sole owner of Rosetree & Company, Ltd. (Rosetree), the Plan sponsor, and the only participant in the Plan, there is no jurisdiction under Title I of the Employee Retirement Income Security Act of 1974 (the Act), pursuant to 29 CFR 2510.3-3(b). However, there is jurisdiction under Title II of the Act pursuant to section 4975 of the Code.

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3.  For purposes of this exemption, references to specific provisions of section 406 of Title I of the Act, unless otherwise specified, should be read to refer as well to the corresponding provisions of section 4975 of the Code.

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[FR Doc. 2017-13508 Filed 6-27-17; 8:45 am]

BILLING CODE 4510-29-P