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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; South Central New York District Council of Carpenters Pension Fund (the Fund), et al. [Notices] [02/01/2000]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; South Central New York District Council of Carpenters Pension Fund (the Fund), et al. [02/01/2000]

[PDF Version]

Volume 65, Number 21, Page 4852-4855


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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2000-01; Exemption Application No. D-
10755, et al.]

 
Grant of Individual Exemptions; South Central New York District 
Council of Carpenters Pension Fund (the Fund), 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

[[Page 4853]]

representations. The applications have been available for public 
inspection at the Department in Washington, D.C. 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.

South Central New York District Council of Carpenters Pension Fund 
(the Fund) Located in Johnson City, New York

[Prohibited Transaction Exemption 2000-01; Exemption Application No. D-
10755]

Exemption

    The restrictions of sections 406(a), 406(b) (1) and (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) of improved real property (the 
Property) to the Fund by the Local 281 Carpenters Property Corporation 
(the Corporation), a party in interest with respect to the Fund, 
provided the following conditions are met:
    (a) The terms and conditions of the Sale are at least as favorable 
to the Fund as those obtainable in an arm's length transaction with an 
unrelated party;
    (b) The Fund purchases the Property for cash from the Corporation 
for the lesser of $250,000 or the fair market value of the Property as 
of the date of the Sale;
    (c) the Sale is monitored and approved by an independent fiduciary 
acting on behalf of the Fund;
    (d) The Sale is a one-time transaction for cash; and
    (e) The Fund pays no fees or commissions 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 December 17, 1999 at 64 
FR 70740.

Written Comments

    The Department received one comment from interested persons (the 
commentator) regarding the notice of proposed exemption (the Notice).
    With respect to the comment received by the Department from the 
commentator, the letter expressed total opposition to the proposed 
transaction. The letter further stated that ``the money was meant to be 
for pension purposes * * * ``and that the commentator ``will lose by 
this deal.'' The commentator lastly remarked that the ``money could 
grow through [other] investments.
    The applicant had the Fund's independent fiduciary, Mr. John P. 
Jeanneret, Ph.D. (Mr. Jeanneret) respond to the commentator * * *'' In 
this regard, Mr. Jeanneret stated that the purchase of the Property 
constitutes a prudent investment and that the Fund will obtain the 
Property at a favorable price, which is 16% less than the equalized 
value of the property's tax assessment and equivalent to the fair 
market value of the property as if it was vacant land and ready for 
redevelopment. In addition, Mr. Jeanneret stated that the proposed 
transaction is an appropriate investment for the following reasons: it 
represents less than 1% of the Fund's assets, it would relieve the Fund 
of the continued obligation to pay rent, and it would provide 
additional income for the Fund in the form of rent from the Property's 
other tenants. Mr. Jeanneret, lastly, reminded the commentator that 
``the Fund is a defined benefit plan that must provide promised 
retirement benefits to its participants, regardless of investment 
downturns or depressed real estate values.'' Mr. Jeanneret continued by 
stating that given the ratio of plan assets this investment represents, 
1%, ``the impact of an investment downturn or depressed real estate 
value * * *`` would not affect the security of * * *`` guaranteed 
pension benefits.''
    The Department believes that the Fund's purchase of the Property is 
consistent with the Fund's investment objectives, in the interests of 
the participants, and is protective of the Fund and its participants. 
Accordingly, based on the entire record, the Department has determined 
to grant the exemption as proposed.

FOR FURTHER INFORMATION CONTACT:  J. Martin Jara of the Department, 
telephone (202) 219-8883 (this is not a toll free number).

S & S Partnership, Inc. Profit Sharing Plan (the Plan) Located in 
Stony Brook, New York

[Prohibited Transaction Exemption 2000-02; Exemption Application No. D-
10807]

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 loan (the Loan) totaling $200,000 by the Plan to 
Hiramco Realty Corporation (Hiramco), a disqualified person with 
respect to the Plan, provided that the following conditions are met:
    (a) The terms of Loan by the Plan are at least as favorable to the 
Plan as those obtainable in an arm's length transaction with an 
unrelated party;
    (b) the Loan does not exceed 20% of the assets of the Plan, 
throughout the duration of the Loan;
    (c) the Loan is secured by a first mortgage on certain real 
property (the Property) which has been appraised by a qualified 
independent appraiser to have a fair market value not less than 150% of 
the principal amount of the Loan;
    (d) the fair market value of the collateral remains at least equal 
to 150% of the outstanding principal balance plus accrued but not 
unpaid interest, throughout the duration of the Loan;
    (e) Mr. Steven C. Fuchs and his wife, Margaret Fuchs (the Fuchs) 
are the only Plan participants to be affected by the Loan transaction; 
\1\ and
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    \1\ Since the Fuchs are the sole owners of the Plan sponsor and 
the only participants in the Plan, there is no jurisdiction under 
Title I of 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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    (f) should any employee of the S & S Partnership, Inc., the Plan 
Sponsor, become eligible for plan participation, the new plan 
participant will be enrolled in another qualified retirement plan or 
Hiramco may elect to pay the entire balance on the Loan.

[[Page 4854]]

    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
notice of proposed exemption published on December 17, 1999 at 64 FR 
70742.
    For Further Information Contact:
     J. Martin Jara of the Department, telephone (202) 219-8881. (This 
is not a toll-free number.)

Les Olson Company, Inc. Money Purchase Plan (M/P Plan) and Les 
Olson Company, Inc. Profit Sharing Plan (P/S Plan, collectively; 
the Plans) Located in Salt Lake City, Utah

[Prohibited Transaction Exemption 2000-03; Exemption Application Nos. 
D-10810 and D-10811]

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 the proposed series of loans (the Loans), originated 
within a five-year period, by the Plans to Les Olson Company, Inc. (the 
Employer), a party in interest with respect to the Plans, provided that 
the following conditions are met:
    (1) The total amount of the outstanding Loans does not exceed 20 
percent (20%) of the Plans' total assets at any time during the 
transactions and each of the Plan's allocable portion of such Loans 
does not exceed 20 percent (20%) of such Plan's total assets;
    (2) Each Loan entered into by the Plans is made pursuant to the 
terms and conditions of the Loan Agreement (the Loan Agreement) 
executed by the parties and signed on behalf of the Plans by the Plans' 
duly appointed independent, qualified fiduciary (the Independent 
Fiduciary);
    (3) All terms and conditions of the Loans are at least as favorable 
to the Plans as those the Plans could obtain in an arms-length 
transaction with an unrelated third party;
    (4) Each Loan is: (i) For a maximum term of five 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 the Employer to purchase office equipment (the 
Equipment) which will be leased by the Employer in the ordinary course 
of its business to unrelated parties; 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;
    (5) New Equipment is valued for collateralization purposes at 80 
percent (80%) of the invoice price paid by the Employer 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;
    (6) Prior to the approval of each Loan, the Independent Fiduciary 
determines, on behalf of the Plans, that each Loan is prudent and in 
the best interests of the Plans, and protective of the Plans and its 
participants and beneficiaries;
    (7) The Independent Fiduciary conducts a review of all terms and 
conditions of this exemption, and the Loans, including the applicable 
interest rate; the sufficiency of the collateral pledged for each Loan; 
the financial condition of the Employer; and the compliance with the 
20% limitation for the Plans (and each Plan's) maximum total Loan 
amount prior to approving each disbursement under the Loan Agreement; 
and
    (8) The Independent Fiduciary is authorized to take whatever action 
is necessary to protect the Plans' interests throughout the duration of 
the exemption, and throughout the duration of any Loan entered into 
under this 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 November 24, 1999 at 64 
FR 66208.

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 this notice granting 
the exemption. Subsequent to the expiration of the exemption, the Plans 
may hold any Loans originating 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) 219-8883 (This is not a toll-free number).

TMI Systems Design Corporation 401(k) Profit Sharing Plan (the 
Plan) Located in Dickinson, North Dakota

[Prohibited Transaction Exemption 2000-04; Exemption Application No. D-
10821]

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 the sale by the Plan of certain limited partnership 
interests (the Interests) to Northern Capital Trust Company (Northern), 
the Plan's trustee and a party in interest with respect to the Plan, 
for $185,316 in cash, provided the following conditions are satisfied: 
a) the sale is a one-time transaction for cash; b) no commissions are 
charged in connection with the transaction; c) the Plan receives not 
less than the fair market value of the Interests at the time of the 
transaction; and d) the fair market value of the Interests is 
determined by a qualified entity independent of the Plan and of 
Northern.
    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 November 24, 1999 at 64 
FR 66210.
    For Further Information Contact: Gary H. Lefkowitz of the 
Department, telephone (202) 219-8881. (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 are true and complete and

[[Page 4855]]

accurately describe all material terms of the transaction which is the 
subject of the exemption. In the case of continuing exemption 
transactions, if any of the material facts or representations described 
in the application change after the exemption is granted, the exemption 
will cease to apply as of the date of such change. In the event of any 
such change, application for a new exemption may be made to the 
Department.

    Signed at Washington, D.C., this 25th day of January, 2000.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 00-2123 Filed 1-31-00; 8:45 am]
BILLING CODE 4510-29-P