Notice of Proposed Exemptions
[04/30/2007]
Volume 72, Number 82, Page 21302-21307
[[Page 21302]]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Proposed Exemptions and Application Nos.: D-11344, Victor P. Olson
Profit Sharing Plan; D-11355, The Revlon Employees Savings, Investment
and Profit Sharing Plan (the Plan); and L-11365 American Maritime
Officers Safety & Education Plan (the S&E Plan), et al.]
Notice of Proposed Exemptions
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice.
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SUMMARY: This document contains notices of pendency before the
Department of Labor (the Department) of proposed exemptions 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).
Written Comments and Hearing Requests
All interested persons are invited to submit written comments or
requests for a hearing on the pending exemptions, unless otherwise
stated in the Notice of Proposed Exemption, within 45 days from the
date of publication of this Federal Register notice. Comments and
requests for a hearing should state: (1) The name, address, and
telephone number of the person making the comment or request, and (2)
the nature of the person's interest in the exemption and the manner in
which the person would be adversely affected by the exemption. A
request for a hearing must also state the issues to be addressed and
include a general description of the evidence to be presented at the
hearing.
ADDRESSES: All written comments and requests for a hearing (at least
three copies) should be sent to the Employee Benefits Security
Administration (EBSA), Office of Exemption Determinations, Room N-5700,
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC
20210. Attention: Application No. ------, stated in each Notice of
Proposed Exemption. Interested persons are also invited to submit
comments and/or hearing requests to EBSA via e-mail or Fax. Any such
comments or requests should be sent either by e-mail to:
moffitt.betty@dol.gov, or by fax to (202) 219-0204 by the end of the
scheduled comment period. The applications for exemption and the
comments received will be available for public inspection in the Public
Documents Room of the Employee Benefits Security Administration, U.S.
Department of Labor, Room N-1513, 200 Constitution Avenue, NW.,
Washington, DC 20210.
Notice to Interested Persons
Notice of the proposed exemptions will be provided to all
interested persons in the manner agreed upon by the applicant and the
Department within 15 days of the date of publication in the Federal
Register. Such notice shall include a copy of the notice of proposed
exemption as published in the Federal Register and shall inform
interested persons of their right to comment and to request a hearing
(where appropriate).
SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in
applications filed pursuant to section 408(a) of the Act and/or section
4975(c)(2) of the Code, and in accordance with procedures set forth in
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990).
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 requested to
the Secretary of Labor. Therefore, these notices of proposed exemption
are issued solely by the Department.
The applications contain representations with regard to the
proposed exemptions which are summarized below. Interested persons are
referred to the applications on file with the Department for a complete
statement of the facts and representations.
Victor P. Olson Profit Sharing Plan (the Plan) Located in White City,
Oregon
[Application No. D-11344]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of ERISA 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, August 10, 1990). If the exemption is granted,
the restrictions of sections 406(a)(1)(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) of the Code shall not apply to the proposed
cash sale (the Sale) of a parcel of improved real property (the
Property) by the Plan to Victor P. Olson (the Applicant), a party in
interest with respect to the Plan, provided that the following
conditions are met:
(a) The Sale is a one-time transaction for cash;
(b) The terms and conditions of the Sale are at least as favorable
to the Plan as those obtainable in an arm's length transaction with an
unrelated party;
(c) The Plan will receive the greater of $375,000 or the fair
market value of the Property at the time of the Sale;
(d) The Plan is not required to pay any commissions, costs or other
expenses in connection with the Sale; and
(e) The fair market value of the Property is determined by an
independent, qualified appraiser.
Summary of Facts and Representations
1. The applicant is Victor P. Olson, the trustee of the Plan (the
Trustee) as well as the Plan sponsor (the Applicant). The Applicant
manufactures doors and windows. The Trustee has sole investment
discretion regarding the Plan. The Plan has three participants and as
of December 31, 2006, the Plan held assets valued at approximately
$754,371.87. Approximately 50% of the assets of the Plan will be
involved in the proposed transaction.
2. The Property was initially purchased for $218,687.50 from a
third party on October 11, 1996 as an investment. The Property is
identified by the street address, 6425 Crater Lake Highway, Central
Point Oregon. The Property is currently occupied by Swede and Sons Army
Surplus, a third party. The Property is comprised of a 6000 square foot
metal building situated on approximately one acre of land. Other
improvements include asphalt paving, concrete, and a drilled well. In
addition, the Property is in close proximity to real estate owned by
the Applicant.
3. The Applicant requests an exemption for the Sale. The Applicant
represents that the proposed transaction would be feasible because it
would be a one-time transaction for cash. A recent large benefit
distribution to a Plan participant was made in cash. This cash payout
from the Plan has caused the Property to comprise approximately 50% of
the Plan's assets. The Applicant seeks to sell the Property to
diversify the Plan investments. Furthermore, the Applicant states that
the transaction would be in the best interests of the Plan because the
Sale would enable the Plan to invest the proceeds from the Sale in
assets with a higher rate of return. Finally, the Applicant represents
that the transaction will be protective of the rights of the Plan's
participants and beneficiaries because the Plan will receive the
greater of $375,000 or the fair market value of the Property, as
[[Page 21303]]
determined by a qualified, independent appraiser on the date of the
Sale, and will incur no commissions, costs, or other expenses as a
result of the Sale.
4. Rickey R. Richey (Mr. Richey), a MAI appraiser with R&R Richey
Co., located in Phoenix, Oregon, appraised the Property on February 12,
2007. Mr. Richey is a qualified, independent appraiser. Mr. Richey has
been an appraiser since 1979. Mr. Richey used the Income Approach,
Sales Comparison Approach, and assigned an additional value
attributable to a ``specific buyer with a special need for the
property'' (due to the Property's proximity to real estate owned by the
Applicant) to determine the value of the Property. Mr. Richey
represents that his analysis, opinion and conclusion were developed and
the report was prepared in conformity with the Uniform Standards of
Professional Appraisal Practice. In the course of his analysis, Mr.
Richey reviewed files of similar properties that were appraised within
the last 24 months. After inspecting the Property and analyzing all
relevant data, Mr. Richey determined that the fair market value of the
Property as of February 12, 2007, is $375,000.
5. In summary, it is represented that the proposed transaction
meets the statutory criteria of section 408(a) of the Act because: (a)
The Sale is a one-time transaction for cash; (b) The terms and
conditions of the Sale are at least as favorable to the Plan as those
obtainable in an arm's length transaction with an unrelated party; (c)
The Plan will receive the greater of $375,000 or the fair market value
of the Property at the time of the Sale; (d) The Plan is not required
to pay any commissions, costs or other expenses in connection with the
Sale; and (e) The fair market value of the Property is determined by an
independent, qualified appraiser.
Notice to Interested Parties: Notice of the proposed exemption
shall be given to all interested persons in the manner agreed upon by
the Employer and Department within 15 days of the date of publication
of this notice of proposed exemption in the Federal Register. Comments
and requests for a hearing are due forty-five (45) days after
publication of this notice in the Federal Register.
FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department,
telephone (202) 693-8540 (this is not a toll-free number).
The Revlon Employees Savings, Investment and Profit Sharing Plan (the
Plan) Located in New York, New York
[Application No. D-11355]
Proposed Exemption
The Department is considering 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, August 10, 1990). If the exemption is
granted, the restrictions of sections 406(a), 406(b)(1) and (b)(2) and
407(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
(E) of the Code, shall not apply, effective December 18, 2006, to (1)
the acquisition of certain stock rights (Stock Right(s)) by the Plan in
connection with a Stock Rights offering by Revlon, Inc. (Revlon), a
holding company that wholly owns Revlon Consumer Products Corporation
(RCPC), a party in interest with respect to the Plan; (2) the holding
of the Stock Rights by the Plan during the subscription period of the
Stock Rights offering; and (3) the disposition or exercise of the Stock
Rights by the Plan, provided that the following conditions were met:
(a) The Stock Rights were acquired pursuant to Plan provisions for
individually-directed investment of such accounts;
(b) The Plan's receipt of the Stock Rights occurred in connection
with a Stock Rights offering made available on the same terms to all
shareholders of common stock of Revlon;
(c) All decisions regarding the holding and disposition of the
Stock Rights by the Plan were made, in accordance with the Plan
provisions for individually-directed investment of participant
accounts, by the individual Plan participants whose accounts in the
Plan received Stock Rights in connection with the Stock Rights
offering;
(d) The Plan's acquisition of the Stock Rights resulted from an
independent act of Revlon as a corporate entity, and all holders of the
Stock 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 Stock Rights
as other owners of Class A common stock.
EFFECTIVE DATE: This exemption, if granted, will be effective as of
December 18, 2006.
Summary of Facts and Representations
1. RCPC is the sponsor of the Plan. The Plan is a tax-qualified,
defined contribution profit sharing plan that incorporates a cash or
deferred (i.e., 401(k)) arrangement. The trustee of the trust
established under the Plan is Fidelity Management Trust Company (the
Trustee).\1\
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\1\ Fidelity Management Trust Company became the Trustee
effective January 3, 2006, at which time it replaced Putnam
Fiduciary Trust Company as Trustee. Notwithstanding that Fidelity
Management Trust Company serves generally as trustee of the Plan, it
has not served as trustee in respect of the Stock Rights offering.
Accordingly, the Investment Committee established under the Plan
(the Investment Committee) served as trustee of the Stock Rights.
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Revlon is a world leader in cosmetics, skin care, fragrance and
personal care. MacAndrews & Forbes Holdings Inc. (together with its
affiliates, MacAndrews & Forbes), which is wholly owned by Ronald O.
Perelman, beneficially owns 217,444,170 shares of the Class A Common
Stock (including 37,063,156 shares of Class A Common Stock beneficially
owned by a family member, with respect to which shares MacAndrews &
Forbes holds a voting proxy but excluding 1,525,000 that are fully
vested and exercisable within 60 days of December 11, 2006). Mr.
Perelman, through MacAndrews & Forbes, also beneficially owns all of
the outstanding 31,250,000 shares of the Class B Common Stock, which,
together with the Class A Common Stock referenced above, represents
approximately 60% of the outstanding shares of the Corporation's
outstanding Common Stock. Based on the shares referenced above, Mr.
Perelman, as of the Record Date, had approximately 76% of the combined
voting power of the outstanding shares of the Class A and the Class B
Common Stock.
2. Class A common stock and Class B common stock are in all
respects identical except that (i) each share of Class A common stock
entitles the holder to one vote and each share of Class B common stock
entitles the holder to ten votes on all matters being voted on by
Revlon's stockholders, (ii) Class A common stock is publicly traded and
held in the Plan whereas Class B common stock is not publicly traded
and not held in the Plan, and (iii) certain transfer restrictions apply
to Class B common stock that do not apply to Class A common stock.
These restrictions provide that the Class B common stock (all of which
is currently held by MacAndrews & Forbes) can only be transferred to
affiliates of the current holder of Class B common stock.
The Plan provides for a variety of contributions in addition to
401(k) contributions, including after-tax employee contributions,
company-matching contributions, rollover
[[Page 21304]]
contributions and profit-sharing contributions. The Plan permits
individual participants to direct the investment of their entire
account balance under the Plan to the extent described below and is
intended to satisfy the requirements of section 404(c) of ERISA with
respect to all such participant investment directions.
One of the investments available under the Plan is Class A Common
Stock (the Common Stock Fund).\2\ Participants may allocate all
contributions made on their behalf (and any earnings thereon) among the
Common Stock Fund and all of the other investments available under the
Plan.\3\
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\2\ No other ``employer security,'' within the meaning of
section 407 of ERISA, is presently available as an investment under
the Plan.
\3\ Plan participants are effectively free to designate the
extent to which their Plan accounts will be invested in Class A
Common Stock.
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3. As of December 11, 2006, there were approximately 3,376
participants in the Plan. The Plan's assets totaled approximately
$131,932,023. Approximately 1,367 Plan participants and beneficiaries
held shares of Class A Common Stock. The Plan held approximately
1,038,671 shares of Class A Common Stock, or approximately 0.27% of the
then outstanding shares of Class A Common Stock, with a value of
approximately $1,516,459 based on the $1.46 closing price on the New
York Stock Exchange of Class A Common Stock on December 11, 2006), or
approximately 1.1% of Plan assets.
Because the Plan holds Class A Common Stock, Stock Rights were
allocated to Plan participants in proportion to their holdings of Class
A Common Stock under the Plan, and Plan participants were entitled to
dispose of those Stock Rights on the terms and conditions described
more fully below. Participants in the Plan received the same
information regarding the Stock Rights offering as is provided to all
stockholders. In addition, participants were provided a special notice
that describes some features of the Stock Rights offering in easily
understood language, together with additional information that is
peculiar to their status as holders of Class A Common Stock under the
Plan (for example, special rules relating to the payment of the
purchase price for shares under the Stock Rights offering).
4. If the Plan were denied participation in the Stock Rights
offering, Plan participants would not have received the benefit of the
Stock Rights which other stockholders received, including the ability
to realize value by selling Stock Rights. Revlon has requested this
exemption so that Plan participants would be eligible to participate in
the Stock Rights offering on the same basis as other stockholders.\4\
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\4\ The distribution of the Rights was accomplished as a
dividend under Delaware corporate law. Accordingly, Revlon was
required to distribute the Rights to all stockholders on a pro rata
basis. In exercising their fiduciary duties to all stockholders, the
Board of Directors of Revlon was required to treat all stockholders
(including the Plan) the same and cannot pay a dividend to some, but
not all, stockholders.
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5. Revlon launched the Stock Rights offering on December 18, 2006.
The Stock Rights offering expired at 5 p.m., New York, New York local
time on January 19, 2007. The amount of the Stock Rights offering was
$100 million (the Maximum Amount).
Each Stock Right entitles its holder to purchase a number of shares
of Class A Common Stock such that the aggregate number of shares of
Class A Common Stock to be offered in the Stock Rights offering,
multiplied by the Subscription Price, will equal the Maximum Amount.\5\
The Stock Rights were transferable, as described to Plan participants
in the Stock Rights prospectus. A market for the Stock Rights did
develop and was maintained: The Stock Rights began trading on the New
York Stock Exchange on December 20, 2006, and ceased trading January
18, 2007 (i.e., the day before the expiration of the offering). The
Stock Rights were, in fact, sold for each Plan participant who directed
a sale or who did not give a proper exercise order.
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\5\ Revlon is required under its credit agreement to use the
proceeds of a $110 million equity issuance by Revlon, to be
completed on or before March 31, 2007, to promptly reduce its
indebtedness. Revlon has determined that a rights offering such as
the Stock Rights offering is the most appropriate way for it to
fulfill the capital commitment while providing an opportunity for
all stock holders of Revlon, including the Plan participants, to
retain their pro rata ownership in Revlon. Revlon believed that it
will not be able to timely fulfill its credit agreement commitment
if the Stock Rights offering is delayed until prospective exemptive
relief is provided.
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6. Revlon paid all of the fees and expenses attributable to the
Stock Rights offering (other than any fees that may be charged by
brokers or nominees). No fees or expenses were paid by the Plan (other
than any standard commissions that may apply to the sale of any Right).
The Stock Rights were sold and a commission was charged upon the sale
of rights consistent with the disclosure to Plan participants in the
rights offering prospectus. For any Stock Rights sold by the Plan, a
commission of 2.9 cents per right was charged to the Plan account from
which the Stock Right was sold. The commission was disclosed to
participants in the materials provided explaining the Stock Rights
offering. The commission was not paid to Revlon but to a broker-dealer,
National Financial Services (NFS) of New York City, New York, for the
sale transaction. NFS is an affiliate of the Trustee.
7. The Investment Committee considered whether it was appropriate
and in the best interests of the Plan to permit the Trustee to effect
sales of Stock Rights under the Plan through NFS. The Investment
Committee took the following considerations into account, among others:
(a) Brokerage services required to effect the sales transactions are
necessary services for the operation of the Plan; (b) the reputation of
NFS as a reputable broker; (c) the already established procedures
between the Trustee and NFS for the prompt execution of sales
transactions under the Plan; (d) the ability of NFS to accept the
engagement on very short notice (i.e., the short notice provided by
Revlon); (e) the reasonable price charged for the brokerage services
when compared with other unrelated brokers; and (f) the short-term
nature of the arrangement. Following discussion, the Investment
Committee authorized the use of NFS as broker for effecting sales of
Stock Rights under the Plan. Although Fidelity is affiliated with NFS,
Fidelity did not use any discretion to select NFS as broker for the
Stock Rights. Plan participants paid commissions on the sale of their
Stock Rights in the same manner as any other similarly situated
shareholder paid commissions on the sales of their Stock Rights.
8. Each Right carries with it a basic subscription privilege and an
over-subscription privilege. The basic subscription privilege entitles
a Rights holder to subscribe for its pro rata share of Class A Common
Stock offered in the Stock Rights offering. MacAndrews & Forbes has
agreed, upon the consummation of the Stock Rights offering and at the
Subscription Price, to acquire the number of shares of Class A Common
Stock as equals the number of shares of Class A Common Stock that
MacAndrews & Forbes would otherwise have been entitled to purchase in
the Stock Rights offering pursuant to its basic subscription privilege.
Except for MacAndrews & Forbes, all holders of Common Stock who elected
to exercise their Rights in full were also permitted to subscribe for
the remaining shares at the same Subscription Price per share, to the
extent that other shareholders did not exercise all of their rights in
full. Although MacAndrews & Forbes, as a holder of Common Stock, would
otherwise have been entitled to such over-subscription privilege,
[[Page 21305]]
MacAndrews & Forbes has agreed to subordinate such rights in order to
enhance the over-subscription privilege of other stockholders.
MacAndrews & Forbes agreed to ``back-stop'' $75 million of the
Stock Rights offering by purchasing, on the same terms as the Stock
Rights offering, such number of shares of Class A Common Stock offered
but not purchased by other Rights holders as would be sufficient for
the aggregate gross proceeds of the Stock Rights offering to total $75
million. With respect to the shares offered in the Stock Rights
offering in excess of the $75 million being backstopped by MacAndrews &
Forbes (i.e., shares with an approximate value of $25 million),
MacAndrews & Forbes had the right, but not the obligation, pursuant to
a private placement agreement with the Revlon, to purchase additional
shares of Class A Common Stock, at the Subscription Price, in the event
the Stock Rights offering was not fully subscribed after Rights
holders, other than MacAndrews & Forbes, exercise their basic and over-
subscription privileges.
9. If a sufficient number of shares were not available to fully
satisfy the over-subscription privilege requests, the available shares
were to be sold pro rata among Rights holders who exercised their over-
subscription privilege based on the number of shares each Rights holder
subscribed for under the basic subscription privilege. Any excess
subscription payments were returned without interest or deduction
promptly after the expiration of the Stock Rights offering.
Any election to exercise a Right (whether made with respect to
Stock Rights held under the Plan or otherwise) was irrevocable once
made. Plan participants who wanted to exercise some or all of their
Rights were required to notify the Trustee on or before the date that
is approximately seven (7) calendar days before the expiration of the
Stock Rights offering (the Plan Election Date).\6\
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\6\ This date was before the expiration date of the Stock Rights
offering in order to enable the Trustee to review and implement
participant directions (including the liquidation of individual
account balances necessary to fund each participant's exercise
price) and provide such aggregate instructions to the subscription
agent under the Offering within the time constraints imposed
generally with respect to the Stock Rights offering. Because the
Stock Rights offering was extended for at least thirty (30) calendar
days, Revlon did not anticipate that this requirement was unduly
restrictive for Plan participants.
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10. Participants were also entitled to direct the Trustee to sell
the Rights allocated to them on the open market by notifying the
Trustee of such election on or before the Plan Election Date; any such
election was irrevocable once made and were executed as soon as
practicable after it is received. To the extent that a participant did
not elect to either exercise or sell the Rights credited to his or her
account on or before the Plan Election Date, the Investment Committee
instructed the Trustee to attempt to sell such Rights on the open
market in the same manner as if the participant had directed such a
sale. The Investment Committee instructed the Trustee not to exercise
Rights where the Subscription Price exceeds the per share public
trading price of Class A Common Stock at the time for exercise (in
which case an attempt was made to sell the Rights instead, although the
Rights likely would have no value in such a case and thus would expire
without value). A confirmation of a sale or exercise of rights, as the
case may be, appeared on participant statements.
11. Approximately three (3) calendar days before the expiration of
the Stock Rights offering, the Trustee liquidated an amount sufficient
to pay a Plan participant's exercise price by selling a pro-rata
portion of the amounts held in such participant's various investment
funds (other than the Common Stock Fund) and transferred such funds to
the subscription agent in order to participate in the Stock Rights
offering on behalf of Plan participants who elect to exercise some or
all of their Rights. No Stock Rights under the Plan were exercised
before this date. The shares of Class A Common Stock purchased upon the
consummation of the Stock Rights offering were be allocated to the
accounts of Plan participants as soon as practicable thereafter.
12. In summary, it is represented that the proposed transaction
meets the statutory criteria of section 408(a) of the Act because: (a)
The Stock Rights were acquired pursuant to Plan provisions for
individually-directed investment of such accounts; (b) The Plan's
receipt of the Stock Rights occurred in connection with a Stock Rights
offering made available on the same terms available to all shareholders
of common stock of Revlon; (c) All decisions regarding the holding and
disposition of the Stock Rights by the Plan were made, in accordance
with the Plan provisions for individually-directed investment of
participant accounts, by the individual Plan participants whose
accounts in the Plan received Stock Rights in connection with the Stock
Rights offering; (d) The Plan's acquisition of the Stock Rights
resulted from an independent act of Revlon as a corporate entity; and
(e) The Plan received the same proportionate number of Stock Rights as
other owners of Class A common stock.
Notice to Interested Persons: Notice of the proposed exemption
shall be given to all interested persons in the manner agreed upon by
the Employer and Department within 15 days of the date of publication
in the Federal Register. Comments and requests for a hearing are due
forty-five (45) days after publication of the notice in the Federal
Register.
FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department,
telephone (202) 693-8540 (this is not a toll-free number).
American Maritime Officers Safety & Education Plan (the S&E Plan)
Located in Dania Beach, Florida and Toledo, Ohio
[Exemption Application No. L-11365]
Proposed Exemption
The Department is considering granting the following exemption
under the authority of section 408(a) of the Act and in accordance with
the procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836,
August 10, 1990). If the exemption is granted, the restrictions of
sections 406(a)(1)(C) and 406(a)(1)(D) of the Act shall not apply to
the S&E Plan's, doing business as STAR Center, entering into an
agreement with Kongsberg Maritime Simulator Inc. (Kongsberg), a party
in interest, to provide certain services (the Services) to Kongsberg at
the Dania Beach, Florida facility (the Facility) involving hydrodynamic
and geographic modeling and training required in connection with
Kongsberg's contract with the U.S. Navy, provided that the following
conditions are met:
Conditions
This proposed exemption is subject to the following conditions:
(a) The S&E Plan will charge and will be paid for the Services at
the rates approved by the Board of Trustees of the S&E Plan (the
Trustees) for similar services provided to unrelated third parties;
(b) The terms of the arrangement between the S&E Plan and Kongsberg
are at least as favorable to the S&E Plan as those obtainable in an
arm's length transaction with an unrelated party;
(c) An independent auditor will perform annual audits of the S&E
Plan to identify and reconcile any recordkeeping discrepancies
involving the Services; and
(d) The S&E Plan will maintain, for a period of six (6) years, the
records necessary to determine whether the
[[Page 21306]]
conditions of this exemption have been met.
Summary of Facts and Representations
1. The S&E Plan is a jointly administered multiemployer welfare
training plan funded pursuant to a collective bargaining agreement. The
purposes of the S&E Plan are to (a) develop and execute programs for
the education, development and improvement of licensed marine officers,
(b) develop and execute programs to increase safety in the operation of
marine vessels, (c) create and execute programs to develop and maintain
a skilled pool of licensed marine officers and (d) develop and execute
a research program on a variety of issues of interest to S&E Plan
participants and their employers. The S&E Plan conducts training and
accommodates the students attending training at the Facility. As of
January 6, 2006, the S&E Plan had 3,495 participants and beneficiaries
and $43,563,887 in plan assets.
Kongsberg is an industry leader in supplying simulators that are
used in the training of professional mariners. The S&E Plan, doing
business as the STAR Center, utilizes Kongsberg marine simulators to
provide training for participants of the S&E Plan.
2. Kongsberg has provided services to the STAR Center that include:
Delivering simulation software and hardware; providing training on the
use of its products; and providing software updates and technical
support to the STAR Center. Accordingly, Kongsberg could be viewed as a
party in interest to the Plan as a service provider under ERISA Sec.
3(14) and certain transactions between the S&E Plan and Kongsberg would
be prohibited transactions under ERISA section 406(a).
The applicant represents that because of the unique nature of the
maritime industry, and the specialized niches held by Kongsberg and the
STAR Center, the STAR Center is especially suited to provide training-
related services to Kongsberg. Kongsberg has recently signed a contract
with the United States Navy to supply a total of 57 navigation
simulators that will constitute a critical part of an ongoing U.S. Navy
program for navigation, seamanship and ship handling training. Because
of the experience and expertise of the STAR Center, Kongsberg wishes to
subcontract with the STAR Center to permit the STAR Center to perform
certain hydrodynamic modeling and geographic modeling necessary for the
development of the navigation simulators, and to provide training
assistance. The S&E Plan wishes to contract with Kongsberg to provide
these services since it would be in furtherance of the overall purposes
of the S&E Plan and beneficial to the STAR Center and the S&E Plan
participants, as well as the United States Navy.
3. The Facility is home to the STAR Center. S&E Plan participants
attend courses at the STAR Center, which is among the most
comprehensive and advanced maritime training and research facilities in
the world. The STAR Center provides participants in the S&E Plan with
complete license training, license upgrading and certifications with
respect to various U.S. Coast Guard and international treaty
requirements. The STAR Center also has the capability to develop models
of vessels and ports that can be utilized in training programs.
At the core of the STAR Center is the 360-degree full mission
training bridge, from which officers can simulate command of various
types of vessels in over a hundred different waterways from around the
world. The instructors at the STAR Center and the simulator's
programmers use the simulator to re-create a variety of situations and
conditions in order to train participants in safe and efficient vessel
operations and effective responses to hazardous environments and
extreme conditions. Many of the models utilized on the simulators are
developed at the STAR Center. The Facility includes other types of
simulators as well. The students' training on the simulators is
interactive and provides for real-time exercises. It is the STAR
Center's ability to provide hands-on, real-time training in a
controlled environment and model different environments that makes the
S&E Plan a valuable benefit to its participants and makes S&E Plan
participants even more valuable to contributing employers. Simulators
used at the STAR Center were purchased from Kongsberg and the S&E Plan
has an on-going maintenance contract with Kongsberg.
4. Participants in the S&E Plan work predominantly on U.S.-flag
ships in foreign and domestic commercial trade. Many serve onboard
civilian ships under contract to the United States government. In
addition, participants also serve as engine and deck officers and
stewards in the U.S.-flag Great Lakes dry bulk and tanker fleets and on
various vessels and tug barges on inland waterways. The S&E Plan,
through the STAR Center, provides centralized training locations for
employees in the maritime industry. In addition, maritime officers are
subject to Federal laws and significant regulation and licensing
requirements by the United States Coast Guard, the Department of
Defense and the Department of Transportation. The S&E Plan and the STAR
Center provide a centralized way for maritime officers to obtain
licenses and training required by the various governmental agencies.
5. Kongsberg will pay the S&E Plan for these services at the rates
approved by the Trustees for similar services provided to unrelated
third parties. The following is a description of the service that would
be provided by the S&E Plan.
Hydrodynamic Modeling: The applicant represents that the key to
realistic ship-handling simulation is an accurate representation of
ship maneuvering characteristics. The mathematical modeling of ship
behavior is referred to as ``Hydrodynamic Modeling.'' The applicant
represents that the STAR Center has developed skills in this area over
the last several years and has personnel uniquely qualified in the
development of hydrodynamic models required by Kongsberg.
Geographic Modeling: In order to represent the environment
necessary for ship-handling simulation, a ``Geographic Model'' needs to
be created. This model includes a visual representation of a particular
port or waterway as well as the bathometric (underwater contours) and
environmental conditions, such as water current and wind. The STAR
Center has developed a substantial in-house capability to create these
models. Although the field of simulation modeling is expanding, models
that will run on a Kongsberg simulator require the use of proprietary
software tools. The applicant represents that the STAR Center is the
largest external developer of Kongsberg-specific geographic models and
has the capability and a reputation for creating accurate geographic
models.
Training: The STAR Center is currently the largest user of
Kongsberg simulators in the country and has years of experience
utilizing these simulators in approved training programs. The applicant
represents that because of this experience, the STAR Center is
qualified to assist Kongsberg in training other users in the proper
operation of the simulators.
6. The applicant represents that the STAR Center has developed and
improved its capabilities over the last thirteen years and is
recognized as a provider of specialized simulator training services.
Because this is a small industry, and there are a limited number of
entities with the requisite experience and expertise in simulation
training, the inability of the S&E Plan to contract
[[Page 21307]]
with Kongsberg to provide modeling and training services unduly
restricts the operations of the S&E Plan. By providing the Services,
the S&E Plan would be able to develop hydrodynamic and geographic
models that will improve the overall quality of maritime officers and
increase safety in the operation of marine vessels, thus furthering the
purposes of the S&E Plan, and would be able to increase the level of
expertise in the application of modeling tools and techniques by the
S&E Plan, thus expanding the training opportunities for S&E Plan
participants, many of whom are employed on vessels assigned to areas of
conflict overseas. Many S&E Plan participants serve on vessels engaged
in the transportation and supply of cargo to troops stationed in
conflicts around the world. Finally, the revenue received by the STAR
Center from the Services will help offset operating costs of the STAR
Center. This, in turn, will allow the S&E Plan to provide expanded
services to plan participants without increasing contribution levels.
7. To ensure that the interests of the S&E Plan and their
participants are well protected, the S&E Plan has retained Bond Beebe
C.P.A. (Bond Beebe) as outside auditors to perform the annual audit of
the Services. Bond Beebe will perform annual audits of the S&E Plan to
identify and reconcile any recordkeeping discrepancies involving the
Services.
8. In summary, the applicant represents that the proposed
transaction satisfies the statutory criteria for an exemption under
section 408(a) of the Act for the following reasons: (a) The S&E Plan
will charge and will be paid for the Services at the rates approved by
the Trustees for similar services provided to unrelated third parties;
(b) The terms of the arrangement between the S&E Plan and Kongsberg are
at least as favorable to the S&E Plan as those obtainable in an arm's
length transaction with an unrelated party; (c) An independent auditor
will perform annual audits of the S&E Plan to identify and reconcile
any recordkeeping discrepancies involving the Services; and (d) The S&E
Plan will maintain, for a period of six (6) years, the records
necessary to determine whether the conditions of this exemption have
been met.
Notice to Interested Persons
Notice to Interested Parties: Notice of the proposed exemption
shall be given to all interested persons in the manner agreed upon by
the Employer and Department within 15 days of the date of publication
of this notice of proposed exemption in the Federal Register. Comments
and requests for a hearing are due forty-five (45) days after
publication of this notice in the Federal Register.
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 of the Act and/or the Code,
including any prohibited transaction 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) Before an exemption may be granted under section 408(a) of the
Act and/or section 4975(c)(2) of the Code, the Department must find
that the exemption is administratively feasible, in the interests of
the plan and of its participants and beneficiaries, and protective of
the rights of participants and beneficiaries of the plan;
(3) The proposed exemptions, if granted, will be supplemental to,
and not in derogation of, any other provisions of the Act and/or the
Code, including statutory or administrative exemptions and transitional
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
(4) The proposed exemptions, if granted, will be subject to the
express condition that the material facts and representations contained
in each application are true and complete, and that each 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. E7-8184 Filed 4-27-07; 8:45 am]
BILLING CODE 4510-29-P
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