[Prohibited Transaction Exemption 2007-06; Exemption Application Nos.
D-11383, L-11384, D-11385, D-11383, L-11384, D-11385, L-11302 and L-
11303]
[04/30/2007]
Volume 72, Number 82, Page 21299-21301
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2007-06; Exemption Application Nos.
D-11383, L-11384, D-11385, D-11383, L-11384, D-11385, L-11302 and L-
11303]
Grant of Individual Exemptions Involving; Kern County Electrical
Pension Trust (the Pension Plan), Kern County Electrical Joint
Apprenticeship and Training Trust (the Apprenticeship Plan), Kern
County Electrical Health and Welfare Plan (the Welfare Plan), The
International Brotherhood of Electrical Workers Local Union 428 (the
Local Union), OPET Health Care and Life Insurance Plans RM3A and RM5A
(Together, the HYL Plans), and OPET Prescription Drug Plan RRx (Plan
RRx; All Three Together, the Plans)
AGENCY: Employee Benefits Security Administration, Labor.
[[Page 21300]]
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
(ERISA or 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.
Kern County Electrical Pension Trust (the Pension Plan); Kern County
Electrical Joint Apprenticeship and Training Trust (the Apprenticeship
Plan); Kern County Electrical Health and Welfare Plan (the Welfare
Plan) \1\ and The International Brotherhood of Electrical Workers Local
Union 428 (the Local Union) Located in Bakersfield, California
[Prohibited Transaction Nos. 2007-06; Exemption Application Nos. D-
11383; L-11384; and D-11385]
Exemption
Section I: Transactions
(a) The restrictions of sections 406(a)(1)(A) through (D),
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) \2\ shall not apply to the sale by the
Pension Plan of a parcel of unimproved real property (Parcel
1) to the Local Union, a party in interest with respect to the
Pension Plan; provided that the conditions in section
II(a),(d),(f),(h),and (i), as set forth below, are satisfied;
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\1\ The Apprenticeship Plan, the Pension Plan, and the Welfare
Plan are, herein, collectively referred to as the Plans.
\2\ For purposes of this exemption, references to specific
provisions of Title I of the Act, unless otherwise specified, refer
also to the corresponding provisions of the Code.
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(b) The restrictions of sections 406(a)(1)(A) through (D),
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) shall not apply to the sale to the
Apprenticeship Plan by the Pension Plan of a parcel of unimproved real
property (Parcel 2) which is adjacent to Parcel 1;
provided that the conditions in section II(b),(c),(e),(g),(h),(i), and
(j), as set forth below, are satisfied; and
(c) The restrictions of sections 406(a)(1)(A) through (D),
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 Act shall not apply to the lease (the
Lease) by the Apprenticeship Plan of office space (the Premises) in a
training facility (the Training Center) to be constructed by the
Apprenticeship Plan on (Parcel 2) to Construction Benefits
Administration, Inc. (CBA), a party in interest with respect to the
Plans, as service provider, whose directors are also trustees of the
Plans and officers of the Local Union; provided that the conditions in
section II(i),(k), (l),(m),(n), and (o), as set forth below, are
satisfied.
Section II: Conditions
The relief, herein, is conditioned upon the adherence to the
material facts and representations set forth in the application files
and upon compliance with the conditions, as set forth in this
exemption.
(a) The sale by the Pension Plan of Parcel 1 to the Local
Union is a one-time transaction for cash;
(b) The sale by the Pension Plan of Parcel 2 to the
Apprenticeship Plan is a one-time transaction for cash;
(c) An independent, qualified fiduciary (the I/F), acting on behalf
of the Apprenticeship Plan:
(1) After negotiating, reviewing, and analyzing the terms of the
purchase of Parcel 2, approves such purchase by the
Apprenticeship Plan;
(2) After negotiating, reviewing, and analyzing the construction of
the Training Center on Parcel 2, approves the construction of
the Training Center by the Apprenticeship Plan;
(3) Determines that the acquisition of Parcel 2 and the
construction of the Training Center by the Apprenticeship Plan would be
feasible, in the interest of, and protective of the Apprenticeship Plan
and its participants and beneficiaries; and
(4) Is responsible for monitoring compliance with the terms and
condition of this exemption and the terms and conditions of the
acquisition of Parcel 2 and the construction of the Training
Center by the Apprenticeship Plan;
(d) The purchase price paid by the Local Union for Parcel
1 is equal to the fair market value of such parcel, as
determined by an independent, qualified appraiser, as of the date of
the sale;
(e) The purchase price paid by the Apprenticeship Plan for Parcel
2 is equal to the fair market value of such parcel, as
determined by an independent, qualified appraiser, as of the date of
the sale;
(f) The terms of the sale by the Pension Plan of Parcel 1
to the Local Union are no less favorable to the Pension Plan than terms
negotiated under similar circumstances at arm's length with unrelated
third parties;
(g) The terms of the sale by the Pension Plan of Parcel 2
to the Apprenticeship Plan are no less favorable to the Pension Plan
and no less favorable to the Apprenticeship Plan than terms negotiated
under similar circumstances at arm's length with unrelated third
parties;
(h) The Plans will not provide any construction financing or
permanent financing to the Local Union in
[[Page 21301]]
connection with the acquisition by the Local Union of Parcel 1
and the construction of a building on Parcel 1 (the Union
Building) by the Local Union, nor will the Pension Plan, the Welfare
Plan, or the Local Union provide any construction financing or
permanent financing to the Apprenticeship Plan in connection with the
acquisition by the Apprenticeship Plan of Parcel 2 and the
construction of the Training Center on Parcel 2 by the
Apprenticeship Plan;
(i) The Plans will not pay any commissions, fees, or other similar
payments to any party in connection with any of the subject
transactions;
(j) The terms of any loan from an unrelated third party obtained by
the Apprenticeship Plan for the purpose of acquiring Parcel 2
or constructing the Training Center provides recourse to such unrelated
third party lender only against the Apprenticeship Plan's interest in
Parcel 2 and not against the general assets of the
Apprenticeship Plan;
(k) Prior to entering into the Lease, the I/F, acting on behalf of
the Apprenticeship Plan, determines that the leasing transaction is
feasible, in the interest of, and protective of the Apprenticeship Plan
and its participants and beneficiaries; and approves the leasing
transaction in accordance with the fiduciary provisions of the Act;
(l) Throughout the duration of the Lease, the I/F, acting on behalf
of the Apprenticeship Plan, monitors compliance with the terms and
conditions of the Lease, ensures that such terms and conditions are at
all times satisfied, and is responsible for legally enforcing the
payment of the rent and the proper performance by CBA under the terms
of the Lease and for taking any and all steps necessary to ensure that
the Apprenticeship Plan is protected, including but not limited to
reviewing, negotiating, and approving the initial Lease and any
amendment, renewal, or extension of such Lease;
(m) Under the provisions of the Lease, the leasing transaction is
at all times on terms that are at least as favorable to the
Apprenticeship Plan and to CBA, as terms that would have been
negotiated under similar circumstances at arm's length with unrelated
third parties;
(n) The rental rate under the terms of the initial Lease and under
the terms of any amendment, renewal, or extension of the Lease, is
adjusted at least every three (3) years in which such Lease is in
effect, and the rental rate reflects the fair market rental value of
the Premises, as determined by an independent, qualified appraiser; and
(o) Notwithstanding anything to the contrary in the Lease, the
Apprenticeship Plan may at any time upon ninety (90) days prior written
notice given to CBA, terminate the Lease and CBA's occupancy of the
Premises, effective as of the date specified in such written notice,
which date shall be at least ninety (90) days after the date such
written notice is given to CBA.
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 February 19, 2007, at 72
Federal Register 6760.
FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the
Department, telephone (202) 693-8540 (This is not a toll-free number).
OPET Health Care and Life Insurance Plans RM3A and RM5A (together, the
H&L Plans); and OPET Prescription Drug Plan RRX (Plan RRX; All Three
Together, the Plans) Located in Portland, Oregon
[Prohibited Transaction Exemption 2007-07; Exemption Application Nos.
L-11302 and L-11303]
Exemption
The restrictions of section 406(a) of the Act shall not apply to
the purchase by the Plans' participants and beneficiaries of
prescription drugs from the Labor Center Pharmacy (LCP), a party in
interest with respect to the Plans, provided the following conditions
are satisfied:
(a) The terms of the transactions are at least as favorable to the
Plans as those the Plans could obtain in similar transactions with an
unrelated party;
(b) Any decisions by the Plans to enter into agreements governing
the subject purchases have been and will be made by Plan fiduciaries
independent of LCP;
(c) At least 50% of the preferred providers participating in the
Preferred Provider Network (PPN) involving LCP are unrelated to LCP or
any other party in interest with respect to the Plans;
(d) LCP will be treated no differently than any other pharmacy
participating in the PPN (e.g., subject to the same reimbursement rates
and oversight as the other participating pharmacies); and
(e) The transactions are not part of an agreement, arrangement or
understanding designed to benefit LCP or any other party in interest
with respect to the Plans.
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 February 13, 2007 at 72
FR 6766.
DATES: Effective Date: This exemption is effective as of January 1,
2001.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 693-8546. (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 at Washington, DC, this 25th day of April, 2007.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. E7-8183 Filed 4-27-07; 8:45 am]
BILLING CODE 4510-29-P
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