Grant of Individual Exemptions; The Prudential Insurance Company
of America [09/10/2004]
Volume 69, Number 175, Page 54812-54815
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2004-13; Exemption Application No. D-
11213 et al.]
Grant of Individual Exemptions; The Prudential Insurance Company
of America
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.
The Prudential Insurance Company of America, Located in Newark, NJ
[Prohibited Transaction Exemption 2004-13; Exemption Application No. D-
11213]
Exemption
The Prudential Insurance Company of America and its current and
future affiliates (collectively, Prudential) shall not be precluded, as
of November 21, 2003, from functioning as a ``qualified professional
asset manager'' (QPAM), pursuant to Prohibited Transaction Class
Exemption 84-14 (PTCE 84-14), 49 FR 9494 (March 13, 1984), solely
because of a failure to satisfy Section I(g) of PTCE 84-14, as a result
of Prudential's affiliation with an entity convicted of violating a
dual-penalty law of Korea, Japan or Taiwan.
This exemption is subject to the following conditions:
(a) The affiliate convicted under a dual-penalty law does not
provide fiduciary or QPAM services to employee benefit plans covered by
the Employee Retirement Income Security Act of 1974 (ERISA) or
otherwise exercise discretionary control over ERISA assets.
(b) ERISA-covered assets are not involved in the misconduct that is
the subject of the affiliate's conviction(s).
(c) Prudential imposes its internal procedures, controls, and
protocols on the affiliate to reduce the likelihood of any recurrence
of misconduct to the extent permitted by local law.
(d) This exemption is not applicable if Prudential, or any
affiliate (other than affiliates convicted of violating a dual-penalty
law of Korea, Japan or Taiwan) is convicted of any of the crimes
described in Section I(g) of PTCE 84-14.
(e) Prudential maintains records that demonstrate that the
conditions of the exemption have been and continue to be met for at
least six years following the conviction of an affiliate under the
dual-penalty laws of Korea, Japan or Taiwan.
(f) The criminal acts in question are neither authorized nor
condoned by Prudential.
(g) Prudential complies with the other conditions of PTCE 84-14,
combined with the procedures it adopts to afford ample protection of
the interests of participants and beneficiaries of employee benefit
plans.
Effective Date: This exemption is effective as of November 21,
2003.
[[Page 54813]]
Written Comments
During the comment period, the Department received one written
comment with respect to the proposed exemption, and no requests for
public hearing. The comment, which was submitted by Prudential, is a
request to expand the relief proposed by the Department. In this
regard, Prudential notes that the operative language of the proposed
exemption provides relief only to Prudential. However, Prudential
states that the relief requested in its application to the Department
also included relief for Prudential's current and future affiliates
that provide QPAM services to ERISA plans. Prudential explains that
without such relief for its current affiliates, any time an affiliate
of Prudential is convicted of violating a Korean, Japanese or Taiwanese
dual-penalty law, and all conditions of the exemption are met, the QPAM
status of every Prudential affiliate that provides QPAM services (other
than the affiliate convicted of violating a dual-penalty law) would be
jeopardized. Therefore, Prudential states that every Prudential
affiliate providing QPAM services (other than the affiliate convicted
of violating a dual-penalty law) would be required to seek relief
through the individual exemption process, or via authorization made
pursuant to PTCE 96-62 (61 FR 39988, July 31, 1996), in order to
maintain its QPAM status following the dual-penalty law conviction.
In addition, Prudential notes that QPAM services are currently
provided by Prudential itself and its affiliate, Prudential Investment
Management Services LLC. Prudential requests that the exemption be made
flexible enough to allow Prudential to restructure the delivery of its
QPAM services in the future as business needs and circumstances evolve.
It is Prudential's view that without relief that extends to the current
and future affiliates of Prudential that provide QPAM services, the
usefulness and flexibility of the exemption would be significantly
compromised over time.
In response to this comment, the Department has revised the
operative language of the final exemption in order to extend relief to
Prudential's current and future affiliates that provide QPAM services.
Accordingly, after giving full consideration to the entire record,
including the comment letter, the Department has determined to grant
the exemption as modified herein. For further information regarding the
comment and other matters discussed herein, interested persons are
encouraged to obtain copies of the exemption application file
(Exemption Application No. D-11213) 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. Anna M. N. Mpras of the
Department, telephone (202) 693-8565. (This is not a toll-free number.)
Les Olson Company, Inc. Profit Sharing Plan (the Plan), Located in Salt
Lake City, Utah
[Prohibited Transaction Exemption 2004-14; Exemption Application No. D-
11225]
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: (i) The series of loans (the Loans), originated
within the five-year period, by the Plan to REVCO Leasing Company, LLC
(Revco), a party in interest with respect to the Plan; and (ii) a
guarantee of the Loans (the Guarantee) by Les Olson Company, Inc. (the
Employer), a party in interest with respect to the Plan, provided that
the following conditions are met:
(a) The total amount of the outstanding Loans under this exemption
and PTE 2000-03 do not, in the aggregate, exceed 20 percent (20%) of
the Plan's total assets at any time during the transactions;
(b) Each Loan entered into by the Plan is made pursuant to the
terms and conditions of a loan agreement (the Loan Agreement) executed
by the parties and signed on behalf of the Plan by the Plan's duly-
appointed independent, qualified fiduciary (the I/F);
(c) All terms and conditions of the Loans are at least as favorable
to the Plan as those the Plan could obtain in an arms-length
transaction with an unrelated third party;
(d) Each Loan is: (i) For a maximum term of five (5) years pursuant
to terms and conditions of the Loan Agreement; (ii) fully amortized and
payable in equal monthly installments of principal and interest; (iii)
used exclusively by Revco to purchase office equipment (the Equipment)
from the Employer, which Revco will lease to the Employer's customers
(in the ordinary course of its business); and (iv) secured by duly
perfected security interests in the new and used Equipment, and by
certain leases of Equipment (Equipment Leases) where such Equipment
Leases are assigned and pledged as collateral for the Loans, which is
at all times equal to 200% of the outstanding principal balance of such
Loan;
(e) New Equipment is valued for collateralization purposes at 80
percent (80%) of the invoice price paid by Revco to purchase such
Equipment less taxes and transportation expenses. Used Equipment and
any Equipment Lease pledged as collateral for the Loans is valued by an
independent, qualified appraiser;
(f) Prior to the approval of each Loan, the I/F determines, on
behalf of the Plan, that each Loan is prudent and in the best interests
of the Plan, and protective of the Plan and its participants and
beneficiaries;
(g) The I/F conducts a review of all terms and conditions of the
exemption, and the Loans, including: (i) The applicable interest rate;
(ii) the sufficiency of the collateral pledged for each Loan; (iii) the
financial condition of the Employer, in connection with the Guarantee,
on at least a quarterly basis; and (iv) compliance with the 20%
limitation for the Plan's maximum total Loan amount prior to approving
each disbursement under the Loan Agreement; and
(h) The I/F takes whatever action is necessary to protect the
Plan's interests, throughout the duration of the exemption, with
respect to any Loan entered into under the exemption.
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 May 4, 2004 at 69 FR
24676.
Temporary Nature of Exemption
The exemption will be temporary and will expire five (5) years from
the date of publication in the Federal Register of the final grant of
this exemption. Subsequent to the expiration of the exemption, the Plan
may hold any Loans originated during this five-year period until the
Loans are repaid or otherwise terminated.
FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department
at (202) 693-8540. (This is not a toll-free number.)
[[Page 54814]]
The Employees' Retirement Plan of Storytown U.S.A., Inc. and
Participating Affiliated Companies (the Plan), Located in Glen Falls,
New York
[Prohibited Transaction Exemption 2004-15; Exemption Application No. D-
11251]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (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) through
(E) of the Code, shall not apply, effective July 29, 2004, to: (1) The
making of a loan (the Loan) to the Plan in an original principal amount
sufficient to cover the Plan's unfunded liability upon termination, by
Storytown U.S.A., Inc. (Storytown), the Plan sponsor and a party in
interest with respect to the Plan; (2) the assignment (the Assignment)
by the Plan to Storytown of all rights, title and interest the Plan has
in claims (the Claims) against certain investment advisers (the
Responsible Parties), in connection with losses the Plan incurred
during 2003 and 2004; and (3) the potential repayment, by the Plan to
Storytown, of the Loan obligation from proceeds recovered on the Claims
against the Responsible Parties.
This exemption is subject to the following conditions:
(a) The Plan pays no interest in connection with the Loan.
(b) The Loan proceeds are utilized only to satisfy the Plan's
unfunded liability.
(c) None of the assets of the Plan are pledged to secure the Loan
amount.
(d) The Loan is a non-recourse obligation of the Plan.
(e) The Plan is properly terminated and Mr. Charles Wood, the
principal shareholder of Storytown, agrees to waive any benefits he
would have received on the termination of the Plan.
(f) The Plan's rights to any Claims that are not resolved before
final distributions are completed and assigned by the Plan to Storytown
under the terms of the Assignment.
(g) The Assignment is deemed a repayment in full of the Loan by the
Plan. As a result, the Plan has no liability for the Loan and no
interest in the Claims. However,
(1) If the net amount recovered on the Claims against the
Responsible Parties after the Assignment, from any judgment or
settlement of any arbitration proceeding, is equal to or less than the
amount of the Loan, the balance due on the Loan will be automatically
forgiven and such unpaid balance will be treated by Storytown as an
employer contribution to the Plan; or
(2) If the net amount recovered on the Claims against the
Responsible Parties from any judgment or settlement of arbitration
proceeding exceeds the amount of the Loan (the Excess Amount), such
Excess Amount will be treated as a reversion paid by the Plan to
Storytown pursuant to the Plan document.
(h) Notwithstanding the Assignment, the Plan does not release any
claims, demands and/or causes of action which it may have against
Storytown and/or its affiliates.
(i) The Plan incurs no expenses, commissions or transaction costs
in connection with the contemplated transactions, all of which are one-
time occurrences.
(j) All terms of the transactions are at least as favorable to the
Plan as those which the Plan could obtain in similar transactions
negotiated at arm's length with unrelated third parties.
(k) The subject transactions do not involve any risk of loss to
either the Plan or to any of the participants and beneficiaries of the
Plan.
(l) Prior to the Plan's entering the transactions, a qualified,
independent fiduciary (the I/F), which is acting on behalf of the Plan
and which is unrelated to Storytown and/or its affiliates,
(1) Reviews, negotiates and approves the terms and conditions of
the Loan and the Assignment exclusively (but does not monitor legal
proceedings against the Responsible Parties following the Assignment);
(2) Determines that such transactions are prudent and in the
interest of the Plan and its participants and beneficiaries; and
(3) Confirms that the Loan amount is sufficient to satisfy all Plan
liabilities, including the Plan's unfunded liability, and permits the
Plan to terminate on a standard termination basis.
(m) If the I/F resigns, is removed, or for any reason unable to
serve as I/F, prior to the Plan's entering into the transactions, such
I/F is replaced by a successor I/F:
(1) Who is appointed immediately upon the occurrence of such event;
(2) Who is independent of Storytown and its affiliates;
(3) Who is qualified to serve as the I/F; and
(4) Who assumes the duties and responsibilities of the predecessor
I/F.
The Department is also provided written notification of such change
in I/F.
Effective Date: This exemption is effective from July 29, 2004.
For a more complete statement of the facts and representations
supporting the Department's decisions to grant this exemption, refer to
the notice of proposed exemption published on July 20, 2004 at 69 FR
43447.
Written Comments
The Department received one written comment with respect to the
proposed exemption and no requests for a public hearing. The comment,
which was submitted on behalf of Storytown and the Plan, informed the
Department that the Loan was made by Storytown to the Plan on July 29,
2004 and that the last distributions were processed from the Plan on
July 30, 2004 pursuant to the Plan Termination Loan and Assignment
Agreement. The comment also stated that the Plan has currently paid out
all participants, with the exception of Mr. Wood, who previously
executed a waiver of all benefits under the Plan upon the Plan's
termination.
In response to this comment, the Department has revised the
operative language of the exemption by making the exemption effective
as of July 30, 2004. In addition, after giving full consideration to
the entire record, including the written comment, the Department has
decided to grant the exemption, as modified herein.
For further information regarding the comment and other matters
described therein, interested persons are encouraged to obtain copies
of the exemption application file (Exemption Application No. D-11251)
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. Shelly Mui of the Department,
telephone (202) 693-8530. (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
[[Page 54815]]
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 7th day of September, 2004.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 04-20536 Filed 9-9-04; 8:45 am]
BILLING CODE 4510-29-P
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