[Federal Register: June 29, 2005 (Volume 70, Number 124)]
[Notices]
[Page 37440-37444]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29jn05-111]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Exemption Application Nos. D-10993 & L-10994, et al.]
Prohibited Transaction Exemption; 2005-07; Grant of Individual
Exemptions; PAMCAH-UA Local 675 Pension Plan (Pension Plan); PAMCAH-UA
Local 675 Training Fund (Training Fund) (Collectively the Plans)
AGENCY: Employee Benefits Security 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).
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 (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.
PAMCAH-UA Local 675 Pension Plan (Pension Plan); PAMCAH-UA Local 675
Training Fund (Training Fund) (Collectively the Plans); Located in
Honolulu, Hawaii
[Prohibited Transaction Exemption No. 2005-07; Application Nos. D-10993
and L-10994]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the
Act and the sanctions resulting from the application of section 4975 of
the Code, by reason of section 4975(c)(1)(A) through (E) of the Code,
shall not apply to: (1) The Training Fund's purchase (the Purchase) of
an improved parcel of real property (the Property) located at 731
Kamehameha Highway, Pearl City, Hawaii from the Pension Plan; and (2) a
loan (the Loan) from the Pension Plan to the Training Fund to finance
the Purchase. This exemption is subject to the following conditions:
(a) The fair market value of the Property is established by an
independent, qualified, real estate appraiser that is unrelated to the
Plans or any party in interest;
(b) The Training Fund pays no more, and the Pension Plan receives
no less than the fair market value of the Property as determined at the
time of the transaction;
(c) The Pension Plan will, on irreversible default of the Training
Fund, reassume the ownership of the Property automatically without
requirement of a foreclosure and cancel the promissory note;
(d) Under the terms of the Loan, the Pension Plan in the event of
default by the Training Fund has recourse only against the Property and
not the against the general assets of the Training Fund;
[[Page 37441]]
(e) The terms and conditions of the Loan are not less favorable to
the Plans than those obtained in arm's-length transactions with
unrelated parties;
(f) The Plans will not pay any commissions or other expenses with
respect to the transaction;
(g) The Bank of Hawaii (BOH), acting as an independent, qualified
fiduciary for the Training Fund, has determined that the transactions
are in the best interest of the Training Fund and its participants and
beneficiaries;
(h) The First Hawaiian Bank (FHB), acting as an independent,
qualified fiduciary for the Pension Plan, has determined that the
transactions are in the best interest of the Pension Plan and its
participants and beneficiaries; and
(i) FHB will monitor the terms and conditions of the Loan
throughout the duration of the Loan and take whatever actions are
necessary to protect the rights of the Pension Plan.
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 March 23, 2005 at 70 FR
14716.
Mutual Service Life Insurance Company (MSL); Located in Arden Hills, MN
[Prohibited Transaction Exemption 2005-08; Exemption Application No. D-
11267]
Exemption
Section I. Covered Transaction
The restrictions of section 406(a) of the Act and the sanctions
resulting from the application of section 4975 of the Code, by reason
of section 4975(c)(1)(A) through (D) of the Code,\1\ shall not apply,
effective January 1, 2005, to the receipt of cash (Cash) or policy
credits (Policy Credits) by any eligible member (Eligible Member),
including an Eligible Member which is an employee benefit plan (within
the meaning of section 3(3) of Act), an individual retirement annuity
(within meaning of section 408(b) or 408A of the Code), or a tax
sheltered annuity (within the meaning of section 403(b) of the
Code)(each a Plan), including Plans sponsored by MSL for its employees
(the MSL Plans), in exchange for the termination of such Eligible
Member's membership interest in MSL, in accordance with the terms of a
plan of conversion (the Plan of Conversion) adopted by MSL and
implemented pursuant to Minnesota Statutes Section 60A.075 2003).
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\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.
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Section II. General Conditions
This exemption is subject to the following conditions:
(a) The Plan of Conversion was subject to approval, review and
supervision by the Minnesota Commissioner of Commerce (the
Commissioner) and was implemented in accordance with procedural and
substantive safeguards that are imposed under the laws of the State of
Minnesota.
(b) The Commissioner reviewed the terms of the Plan of Conversion
and approved the Plan of Conversion following a determination that such
Plan of Conversion was fair and equitable to all Eligible Members.
(c) Each Eligible Member had an opportunity to vote at a special
meeting to approve the Plan of Conversion after full written disclosure
was given to the Eligible Member by MSL.
(d) Pursuant to the Plan of Conversion, Eligible Members received
Cash, except that Eligible Members received Policy Credits, and not
Cash, to the extent consideration was allocable to the Eligible Member
based on ownership of a policy of the following types:
(1) A policy that was an individual retirement annuity contract
within the meaning of sections 408(b) or 408A of the Code or a tax
sheltered annuity contract within the meaning of section 403(b) of the
Code;
(2) A policy that was an individual annuity contract issued
directly to the Plan participant pursuant to a Plan qualified under
sections 401(a) or 403(a) of the Code; or
(3) A policy that was an individual life insurance policy issued
directly to the Plan participant pursuant to a Plan qualified under
sections 401(a) or 403(a) of the Code. Neither MSL nor any of its
affiliates exercised any discretion or provided investment advice,
within the meaning of 29 CFR 2510.3-21(c), with respect to such
decisions.
(e) After each Eligible Member was allocated a fixed amount of
consideration (Fixed Consideration) of $400, such Eligible Member also
received a variable amount of consideration for each policy owned by
the Eligible Member on September 30, 2003 (the Record Date) to reflect
the Eligible Member's estimated past and future contributions to
surplus as determined by an actuarial formula (approved by the
Commissioner) based on specific features of the policies owned by the
Eligible Member on September 30, 2003.
(f) In the case of a MSL Plan, the independent Plan fiduciary (the
Independent Fiduciary):
(1) Voted on whether to approve or not to approve the
demutualization;
(2) Reviewed and approved MSL's allocation of Cash received for the
benefit of the participants and beneficiaries of the MSL Plans;
(3) Provided the Department with a complete and detailed final
report as it related to the MSL Plans prior to the granting of the
exemption; and
(4) Would take all actions that were necessary and appropriate to
safeguard the interests of the MSL Plans and their participants and
beneficiaries.
(g) All Eligible Members that were Plans participated in the
transaction on the same basis as all Eligible Members that were not
Plans.
(h) No Eligible Member paid any brokerage commissions or fees in
connection with the receipt of Policy Credits.
(i) All of MSL's policyholder obligations remained in force and
were not affected by the Plan of Conversion.
(j) The terms of the transactions were at least as favorable to the
Plans as an arm's length transaction with an unrelated party.
DATES: This exemption is effective as of January 1, 2005.
Section III. Definitions
For the purposes of this exemption, (a) The term ``MSL'' means
Mutual Service Life Insurance Company and any affiliate of MSL, as
defined below in Section III(b).
(b) 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 MSL; and
(2) Any officer, director, or partner in any such person.
(c) The term ``control'' means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.
(d) The term ``Independent Fiduciary'' means a fiduciary who is:
(1) Independent of and unrelated to MSL and its affiliates, and (2)
appointed to act on behalf of the MSL Plans with respect to the
demutualization of MSL. For purposes of this exemption, a fiduciary
will not be deemed to be independent of and unrelated to MSL if: (1)
Such fiduciary directly or indirectly controls, is controlled by or is
under common control with MSL; (2) such fiduciary directly or
indirectly receives any compensation or other consideration in
connection with any transaction described in this exemption,
[[Page 37442]]
except that an Independent Fiduciary may receive compensation for
acting as an Independent Fiduciary from MSL in connection with the
transactions contemplated herein if the amount of 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 such fiduciary from MSL and its affiliates during
any year of its engagement, does not exceed 5 percent (5%) of the
Independent Fiduciary's annual gross revenue from all sources for its
prior tax year.
(e) An ``Eligible Member'' means a person (an individual,
corporation, joint venture, limited liability company, association,
trust, trustee, unincorporated entity, organization or government or
any department or agency thereof) who is an owner of a policy that is
in force on the Record Date, i.e., September 30, 2003.
(f) ``Policy Credit'' means consideration to be paid in the form of
an increase in cash value, account value, dividend accumulations, face
amount, extended term period or benefit payment, as appropriate,
depending on the policy.
(g) ``Effective Date'' means the date of the demutualization, which
occurred on January 1, 2005.
(h) ``The Plan of Conversion'' means the process by which MSL will
convert from a mutual life insurance company to a stock life insurance
company, and following consummation of the Stock Purchase Agreement,
will thereafter continue its corporate existence without interruption
as a wholly owned subsidiary of Country Life Insurance Company. MSL's
conversion to a stock insurance company occurred on the Effective Date
(i.e., January 1, 2005) and was subject to the conditions contained in
the Plan of Conversion.
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 March 23, 2005 at 70 FR
14719.
Written Comments
The Department received one written comment with respect to the
proposed exemption. The comment was submitted by MSL and it requests
certain clarifications to the operative language of the proposal and
the Summary of Facts and Representations (the Summary). These
modifications are described below.
1. Form of Demutualization Consideration. MSL notes that in
Sections II(b) and (d) of the proposal and in other portions, there are
references to an election by Eligible Members as to the form of
consideration received (i.e., Cash or Policy Credits). MSL explains
that Eligible Members were not given the choice as to the form of
consideration they were to receive. Rather, MSL asserts, Eligible
Members received Policy Credits, and not Cash, to the extent
consideration was allocable to the Eligible Member based on ownership
of a policy of the following types:
(a) A policy that was an individual retirement annuity contract
within the meaning of sections 408(b) or 408A of the Code or a tax
sheltered annuity contract within the meaning of section 403(b) of
the Code;
(b) A policy that was an individual annuity contract issued
directly to the Plan participant pursuant to a Plan qualified under
sections 401(a) or 403(a) of the Code; or
(c) A policy that was an individual life insurance policy issued
directly to the Plan participant pursuant to a Plan qualified under
sections 401(a) or 403(a) of the Code.
Therefore, MSL suggests that Section II(b) of the proposal be revised
to read as follows:
(b) The Commissioner reviewed the terms of the Plan of
Conversion and approved the Plan of Conversion following a
determination that such Plan of Conversion was fair and equitable to
all Eligible Members.
MSL further suggests that Section II(d) of the proposal be revised
to read as follows:
(d) Pursuant to the Plan of Conversion, Eligible Members
received Cash, except that Eligible Members received Policy Credits,
and not Cash, to the extent consideration was allocable to the
Eligible Member based on ownership of a policy of the following
types:
(1) A policy that was an individual retirement annuity contract
within the meaning of sections 408(b) or 408A of the Code or a tax
sheltered annuity contract within the meaning of section 403(b) of
the Code;
(2) A policy that was an individual annuity contract issued
directly to the Plan participant pursuant to a Plan qualified under
sections 401(a) or 403(a) of the Code; or
(3) A policy that was an individual life insurance policy issued
directly to the Plan participant pursuant to a Plan qualified under
sections 401(a) or 403(a) of the Code.
Neither MSL nor any of its affiliates exercised any discretion
or provided investment advice, within the meaning of 29 CFR 2510.3-
21(c), with respect to such decisions.
In response to these comments, the Department has made the changes
requested by MSL to Sections II(b) and (d) of the proposal and it notes
MSL's following revision to Representation 25(d) of the Summary:
``Neither MSL nor any of its affiliates exercised any discretion or
provided investment advice, within the meaning of 29 CFR 2510.3-21(c),
with respect to any decision of an Eligible Member.''
With respect to Section II(d) of the proposal, the Department
wishes to point out that it never intended this provision to imply that
an Eligible Member would be given the choice of receiving either Cash
or Policy Credits. Rather, the Department notes that this provision
actually meant that an Eligible Member would be given the opportunity
to receive or to reject the form of demutualization consideration
allocated to such Eligible Member by MSL.
2. Amount of Fixed Consideration. Section II(e) of the proposed
exemption states that after each Eligible Member was allocated Fixed
Consideration equivalent to approximately $400, such Eligible Member
also received a variable amount of consideration. For purposes of
clarity, MSL suggests that this provision be revised to read, in part,
as follows: ``After each Eligible Member was allocated a fixed amount
of consideration (Fixed Consideration) of $400, such Eligible Member
may also have received a variable amount of consideration * * *''
In response, the Department concurs with this clarification and it
has made MSL's requested change to the final exemption. The Department
also notes MSL's corresponding revision to Representation 25(e) of the
Summary.
3. Role of the Independent Fiduciary. Section II(f)(2) of the
proposed exemption states that one of the duties of the Independent
Fiduciary for the MSL Plans was to elect between consideration in the
form of Cash or Policy Credits on behalf of these Plans. Section
II(f)(3) of the proposal states that the Independent Fiduciary reviewed
and approved MSL's allocation of Cash or Policy Credits for the
participants and beneficiaries of the MSL Plans. In keeping with the
clarifications described above in item 1 of this grant notice, MSL
suggests that Section II(f)(2) be deleted and the subsequent
subparagraph be renumbered, accordingly. MSL also suggests that the
phrase ``Cash or Policy Credits'' in Section II(f)(3) be revised to
read ``Cash.''
In response to these comments, the Department has made the
revisions suggested by MSL. In addition, the Department notes MSL's
corresponding revisions to Representation 25 of the Summary, in
paragraphs (f)(2) and (f)(3).
4. Other Revisions to the Summary. In addition to suggesting the
foregoing changes to portions of the operative language of the proposal
and identical representations in the Summary, MSL
[[Page 37443]]
has requested additional clarifications to the Summary. For example,
(a) In Representation 5, MSL requests that the parenthetical ``(MSI
Preferred)'' be revised to include an alternate reference to ``MSI,''
and thereby be amended to read ``(MSI Preferred or MSI).''
(b) To correct a typographical error in Representation 8, MSL
suggests that the word ``of'' be added to the phrase ``the number of
New MSL Members.'' In addition, MSL requests that the defined term
``MSL'' be added to the phrase ``interest in purchasing MSL.''
(c) In Representation 11, MSL suggests that the phrase ``Although a
wholly owned subsidiary of MSL, PSI, formerly provided * * *'' be
revised, in part, to read ``While a wholly owned subsidiary of MSL, PSI
provided * * *''
(d) In Representation 12, MSL requests that the table showing the
MSL Plans be corrected.\2\ In this regard, MSL states that in the name
of the first two MSL Plans, the word ``Employees'' should be
``Employees''' and in the name of the fourth MSL Plan, the word
``Agent's'' should be ``Agents.'' For ``Participant totals,'' MSL
states that the first three dates should be changed to ``9/30/03'' and
the fourth date should be changed to ``12/1/03.'' For ``Asset totals,''
MSL requests that both dates be changed to ``7/7/04.''
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\2\ MSL notes that effective December 31, 2004, the MSI
Employees' Capital Accumulation Plan and Trust, the MSI Employees'
Defined Contribution Retirement Plan and the MSI Employees' Life
Insurance Plan were terminated.
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(e) In Representation 13, MSL suggests that the reference to
``PSI'' be changed to ``MSI Preferred'' and the word ``entitled,'' in
the final sentence, be changed to the word ``required.''
(f) In Representation 22, MSL recommends that the first sentence be
revised to read as follows: ``Decisions on voting whether to approve
the plan of Conversion or as to any matter in connection with such Plan
was made by one or more Plan fiduciaries which were independent of
MSL.'' Also, MSL states that the word ``Employees'' in the name of the
MSL Employees'' Life Insurance Plan should be changed to
``Employees'.''
In response to these comments, the Department notes MSL's foregoing
revisions the Summary.
Accordingly, after giving full consideration to the entire record,
including MSL's comment letter, the Department has determined to grant
the exemption as modified herein. For further information regarding the
comment, additional information provided by the Independent Fiduciary,
and other matters discussed herein, interested persons are encouraged
to obtain copies of the exemption application file (Exemption
Application No. D-11267) the Department is maintaining in this case.
The complete application file, as well as all supplemental submissions
received by the Department, are made 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 FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,
telephone (202) 693-8556. (This is not a toll-free number.)
Liberty Media International, Inc. (LMI); Located in Englewood, CO
[Prohibited Transaction Exemption 2005-09; Exemption Application No. D-
11277]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (b)(2), and
407(a) of the Act shall not apply,\3\ effective July 26, 2004, to (1)
the acquisition by the Liberty Cablevision of Puerto Rico 401(k)
Savings Plan (the Plan) of certain stock rights (the Rights) pursuant
to a stock rights offering (the Offering) by LMI, the Plan sponsor and
a party in interest with respect to the Plan; (2) the holding of the
Rights by the Plan during the subscription period of the Offering; and
(3) the disposition or exercise of the Rights by the Plan.
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\3\ It is represented that because the fiduciaries for the Plan
have not made an election under section 1022(i)(2) of the Act,
whereby the Plan would be treated as a trust created and organized
in the United States for purposes of tax qualification under section
401(a) of the Code, jurisdiction under Title II of the Act does not
apply. Therefore, LMI is not requesting, nor is the Department
providing, exemptive relief under the provisions of Title II of the
Act. The Department is, however, providing exemptive relief under
Title I of the Act.
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This exemption is conditioned upon adherence to the material facts
and representations described herein and upon satisfaction of the
following general conditions:
(a) The Rights were acquired by the Plan pursuant to Plan
provisions for individually-directed investment of participant
accounts;
(b) The Plan's receipt of the Rights occurred in connection with
the Rights Offering made available to all shareholders of LMI common
stock;
(c) All decisions regarding the holding and disposition of the
Rights by the Plan were made in accordance with Plan provisions for
individually-directed investment of participant accounts by the
individual participants whose accounts in the Plan received Rights in
the Offering, and if no instructions were received, the Rights were
sold;
(d) The Plan's acquisition of the Rights resulted from an
independent act of LMI as a corporate entity, and all holders of the
Rights, including the Plan, were treated in the same manner with
respect to the acquisition; and
(e) The Plan received the same proportionate number of the Rights
as other owners of LMI Series A common stock.
DATES: This exemption is effective as of July 26, 2004.
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 March 23, 2005 at 70 FR
14726.
FOR FURTHER INFORMATION CONTACT: Ms. Silvia M. Quezada of the
Department, telephone number (202) 693-8553. (This is not a toll-free
number.)
The North Texas Electrical Joint Apprenticeship and Training Trust Fund
(the Plan); Located in Grand Prairie, Texas
[Prohibited Transaction Exemption No. 2005-10; Application No. L-11245]
Exemption
The restrictions of sections 406(a), 406(b)(1) and 406(b)(2) of the
Act shall not apply to the sale (the Sale(s)) of (1) 1.112 acres of
land (Parcel 1) to the North Texas Chapter, National Electrical
Contractors Association (NECA), a party in interest to the Plan; and
(2) 5.383 acres of land (Parcel 2) to Local Union 20,
International Brotherhood of Electrical Workers (IBEW), a party in
interest to the Plan, provided that the following conditions are met:
(a) The Sales are one-time transactions for cash;
(b) The Plan does not pay any commissions, costs or other expenses
in connection with the Sale of Parcel 1 and Parcel 2 (collectively the
Parcels); and
(c) The Plan will receive an amount equal to the greater of: (i)
$145,000 or the current fair market value of Parcel 1 as established by
an independent, qualified, appraiser and updated at the time of the
Sale; and (ii) $655,000; or the current fair market value of Parcel 2
as established by an independent, qualified, appraiser and updated at
the time of the Sale; and
(d) The terms of the Sales will be no less favorable to the Plan
than terms it would have received under similar circumstances in an
arm's length negotiations with an unrelated party.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this
[[Page 37444]]
exemption, refer to the Notice of Proposed Exemption published on
February 3, 2005 at 70 FR 5705.
FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department,
telephone (202) 693-8540 (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) 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.
Signed in Washington, DC, this 23rd day of June, 2005.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 05-12833 Filed 6-28-05; 8:45 am]
BILLING CODE 4510-29-P