EBSA (Formerly PWBA) Federal Register Notice Prohibited Transaction Exemption
2001-19; Grant of Individual Exemptions; Texas Instruments Employees Pension
Plan (the Plan) et al. [06/04/2001]
EBSA (Formerly PWBA) Federal Register Notice Prohibited Transaction Exemption 2001-19;
Grant of Individual Exemptions; Texas Instruments Employees Pension Plan (the
Plan) et al. [06/04/2001]
Volume 66, Number 107, Page 30021-30023
DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Exemption Application No. D-10918, et al.]
Prohibited Transaction Exemption 2001-19; Grant of Individual
Exemptions; Texas Instruments Employees Pension Plan (the Plan) et al.
AGENCY: Pension and Welfare Benefits 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).
Notices were published in the Federal Register of the pendency
before the Department of proposals to grant such exemptions. The
notices set forth a summary of facts and representations contained in
each application for exemption and referred interested persons to the
respective applications for a complete statement of the facts and
representations. The applications have been available for public
inspection at the Department in Washington, DC. The notices also
invited interested persons to submit comments on the requested
exemptions to the Department. In addition the notices stated that any
interested person might submit a written request that a public hearing
be held (where appropriate). The applicants have represented that they
have complied with the requirements of the notification to interested
persons. No public comments and no requests for a hearing, unless
otherwise stated, were received by the Department.
The notices of proposed exemption were issued and the exemptions
are 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 exemptions are administratively feasible;
(b) They are in the interests of the plans and their participants
and beneficiaries; and
(c) They are protective of the rights of the participants and
beneficiaries of the plans.
Texas Instruments Employees Pension Plan (the Plan) Located in
Dallas, Texas
[Prohibited Transaction Exemption No. 2001-19; Application No. D-10918]
Exemption
The restrictions of sections 406(a), 406(b)(1), 406(b)(2), 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 Code, shall not apply to the Sale (the Sale) by the
Plan to Texas Instruments, Inc. (the Employer) of a parcel of improved
real property (the Property) located in Dallas, Texas. This exemption
is conditioned upon the adherence to the material facts and
representations described herein and upon the satisfaction of the
following requirements:
(a) All terms and conditions of the Sale are at least as favorable
to the Plan as those which the Plan could obtain in
[[Page 30022]]
an arm's-length transaction with an unrelated party;
(b) The Sales price is the greater of $9,400,000 or the fair market
value of the Property as of the date of the Sale;
(c) The fair market value of the Property has been determined by an
independent, qualified appraiser;
(d) The Sale is a one-time transaction for cash; and
(e) The Plan does not pay any commissions, costs or other expenses
in connection with the Sale.
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 15, 2001 at 66
FR 10527.
Written Comments
The Department received three comments from interested persons on
the proposed exemption. The Department forwarded copies of the comments
to the applicant and requested that the subtrustee (Bank of America)
respond in writing to the various concerns raised by the commentators.
A description of the comments and the Bank of America's responses are
summarized below.
One commentator urged that the exemption not be granted because he
believed that the Property had a better chance of appreciation than the
cash equivalent and that the increase in value was not a fair
appraisal.
Bank of America, in response represents the following: It has
determined that the Sale of the Property to the Employer is prudent
under ERISA and is in the best interest of the Plan participants and
beneficiaries based, in part, on its determination that market values
for comparable properties in the Dallas, Texas area continue to be at a
record high and that the current real estate market presents a
favorable selling opportunity to the Plan. Although currently selling
at record highs, real estate values can decline for a number of
reasons, such as downturns in the economy, environmental contamination,
functional obsolescence, and changes in use and/or the growth patterns
surrounding a property's location. The improvements, constructed in
1981, are now approximately 20 years old and have a remaining economic
life of 27 years. The building is well maintained; however, the
structure is aging and at some point it may be less attractive in the
market place from the standpoint of physical plant and functionality.
The commentator's objection to only a 50% increase in value over the 22
years of the lease does not recognize the actual yield that has been
produced by the annual rental income in addition to the sales price
proceeds.
Two commentators took issue with the selection of the appraiser for
the Property, and the subsequent evaluation, specifically requesting
multiple appraisals and questioning whether the appraiser specialized
in commercial real estate. Bank of America notes that as the subtrustee
of the Plan, Bank of America has the responsibility to make the good
faith fiduciary determination that the amount received by the Plan upon
the Sale is no less than adequate consideration, as defined in ERISA
Sec. 3(18). In making the good faith determination that the Plan will
receive adequate consideration, Bank of America, as a fiduciary, has
relied on the appraisal report of the independent appraiser, which will
be updated at the closing date, to insure that the amount received is
no less than the then fair market value. Furthermore, Bank of America
represents the Property has been appraised by an independent appraiser,
the Pyles Whatley Corporation, a respected commercial real estate
appraisal firm. It has a national appraisal practice and has appraised
properties of large industrial sites in more than 25 states in 1999 and
2000. The appointment of the appraiser was made properly by Bank of
America rather than other Plan fiduciaries since the appraisal report
will be used by Bank of America in complying with its fiduciary
responsibility with respect to the Sale.
The appraisal follows standard methodologies including the use of
values of comparable properties. Bank of America has carefully reviewed
the appraisal and other information that it has available to it and
believes that the appraisal correctly determines the fair market value
of the Property. In making this good faith fiduciary determination to
sell the Property at this value, after having made a prudent review of
the valuation report and the relevant circumstances at the time of the
valuation report, Bank of America does not believe that there is any
reason to require multiple appraisals to reach a valuation for the
Property.
Accordingly, after giving full consideration to the entire record,
including the comments by the commentators, and the responses of the
applicant, the Department has determined to grant the exemption as
proposed. In this regard, the comments submitted to the Department have
been included as part of the public record of the exemption
application. The complete application file, including all supplemental
submissions received by the Department, is made available for public
inspection in the Public Documents Room of the Pension and Welfare
Benefits Administration, Room N-1513, U.S. Department of Labor, 200
Constitution Ave. NW, Washington DC 20210.
FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department,
telephone (202) 219-8883 (this is not a toll-free number).
THS Profit Sharing Plan (the Plan) Located in Bedford Hills, New
York
[Prohibited Transaction Exemption No. 2001-20; Application No. D-10921]
Exemption
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 the sale (the Sale) by the Plan of two life insurance
policies (the Policies) which insure Tim H. Shoecraft, the sole
participant (the Participant),\1\ to the Shoecraft Family Trust dated
October 9, 1991 (the Trust), which is a disqualified party with respect
to the Plan under section 4975(e)(2) of the Code, provided that the
following conditions are met:
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\1\ Because Tim H. Shoecraft is the sole shareholder of
Shoecraft and Associates and he is the only participant in the Plan,
there is no jurisdiction under Title I of the Employee Retirement
Income Security Act of 1974 (the Act) pursuant to 29 CFR 2510.3-
3(b). However, there is jurisdiction under Title II of the Act
pursuant to section 4975 of the Code.
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(a) The Participant is the insured under the contract;
(b) Prior to the Sale, the Plan will afford the insured notice of
the Sale and the opportunity to purchase the Policies;
(c) The Sale will be for full and adequate consideration, based
upon the cash surrender value of the Policies at the time of the
transaction;
(d) The Plan is authorized to purchase and own life insurance;
(e) The amount received by the Plan as consideration for the Sale
is at least equal to the amount necessary to put the Plan in the same
cash position as it would have been in had it retained the contract,
surrendered it, and made any distribution owing to the Participant of
his vested interest under the Plan; and
(f) The Plan is not required to pay any commissions, costs or other
expenses in connection with the Sale.
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 April 16, 2001 at 66 FR
19533.
FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department,
[[Page 30023]]
telephone (202) 219-8883 (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 exemptions does not
apply and the general fiduciary responsibility provisions of section
404 of the Act, which among other things require a fiduciary to
discharge his duties respecting the plan solely in the interest of the
participants and beneficiaries of the plan and in a prudent fashion in
accordance with section 404(a)(1)(B) of the Act; nor does it affect the
requirement of section 401(a) of the Code that the plan must operate
for the exclusive benefit of the employees of the employer maintaining
the plan and their beneficiaries;
(2) These exemptions are supplemental to and not in derogation of,
any other provisions of the Act and/or the Code, including statutory or
administrative exemptions and transactional rules. Furthermore, the
fact that a transaction is subject to an administrative or statutory
exemption is not dispositive of whether the transaction is in fact a
prohibited transaction; and
(3) The availability of these exemptions is subject to the express
condition that the material facts and representations contained in each
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, DC, this 30th day of May, 2001.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 01-13906 Filed 6-1-01; 8:45am]
BILLING CODE 4510-29-P
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