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Secretary of Labor Thomas E. Perez
Proposed Exemptions; Fish Lake Beach, Inc. Profit Sharing Plan (the Plan) [Notices] [02/29/2000]

EBSA (Formerly PWBA) Federal Register Notice

Proposed Exemptions; Fish Lake Beach, Inc. Profit Sharing Plan (the Plan) [02/29/2000]

[PDF Version]

Volume 65, Number 40, Page 10826-10831


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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-10654, et al.]

 
Proposed Exemptions; Fish Lake Beach, Inc. Profit Sharing Plan 
(the Plan)

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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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 (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 
request 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 request for a hearing (at least 
three copies) should be sent to the Pension and Welfare Benefits 
Administration, Office of Exemption Determinations, Room N-5649, U.S. 
Department of Labor, 200 Constitution Avenue, NW, Washington, DC 20210. 
Attention: Application No., stated in each Notice of Proposed 
Exemption. The applications for exemption and the comments received 
will be available for public inspection in the Public Documents Room of 
the Pension and Welfare Benefits Administration, U.S. Department of 
Labor, Room N-5638, 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

[[Page 10827]]

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.

Fish Lake Beach, Inc. Profit Sharing Plan (the Plan), Located in 
Round Lake, Illinois

[Application No. D-10654]

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 32826, 32847, August 10, 1990). If the exemption 
is granted, 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 proposed cash sale (the Sale) of a certain 
parcel of real property (the Plan Parcel) from the Plan to the trust of 
Emilie Keil (the Keil Trust), a party in interest with respect to the 
Plan, provided 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 receives the greater of $547,080 \1\ or the fair 
market value of the Plan Parcel as of the date of the Sale; and
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    \1\ Appraised value of the property is $485,000, plus a 12.5% 
assemblage value premium ($62,080).
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    (d) The Plan is not required to pay any commissions, costs or other 
expenses in connection with the Sale.

Summary of Facts and Representations

    1. Fish Lake Beach, Inc. (Fish Lake Beach) is a resort located in 
Volo, Illinois. Fish Lake Beach is the sponsor of the Plan, a profit 
sharing plan located in Round Lake, Illinois having 19 participants and 
$1,659,702 in total assets as of December 31, 1998. The sole trustees 
of the Plan are Delmar Maassel and Yvonne Maassel (collectively, the 
Plan Trustees).
    The applicant represents that three of the participants in the 
Plan, Yvonne Maassel, Delmar Maassel, and Yvonne Crow, are minority 
owners of Fish Lake Beach. In this regard, Yvonne Maassel, Delmar 
Maassel, and Yvonne Crow own approximately 16.7%, 3.7%, and 12%, 
respectively, of Fish Lake Beach.
    2. Yvonne Maassel is also the trustee of the Emilie Keil Trust (the 
Keil Trust). The Keil Trust is a trust established on behalf of Emilie 
Keil, the mother of Yvonne Maassel, providing Yvonne Maassel with 
certain powers to be exercised in a fiduciary capacity with respect to 
the disposition of the Keil Trust's assets. The applicant represents 
that, as trustee of the Keil Trust, Yvonne Maassel has the power to 
invest the Keil Trust's assets in real property such as the Plan 
Parcel.
    3. The Plan owns the Plan Parcel, a 20 acre parcel of unimproved 
real property located in Volo, Illinois. The Plan purchased the Plan 
Parcel from the L.B. Anderson Construction Company (the Anderson 
Company), an unrelated party, on March 3, 1994. The applicants 
represent that the Plan purchased the Plan Parcel for short-term 
investment purposes.
    The applicants represent that, prior to the Plan's purchase of the 
Plan Parcel, the Plan Parcel was a portion of a 40 acre parcel of 
unimproved real property owned by the Anderson Company (the Original 
Property). The applicants represent that the Anderson Company divided 
the Original Property into two parcels of roughly the same size and 
value, the Plan Parcel and a parcel also comprising approximately 20 
acres of unimproved real property (the Maassel Parcel). The applicants 
represent that the Anderson Company sold each parcel (the Anderson 
Sales) on March 3, 1994. The Plan purchased the Plan Parcel for 
$330,330 and a group of investors related to the Maassels purchased the 
Maassel Parcel for $330,330. In this regard, the applicants represent 
that of the Maassel Parcel's purchase price of $330,330: Delmar Maassel 
and Yvonne Maassel contributed $50,530; Yvonne Crow, a daughter of 
Delmar Maassel and Yvonne Maassel, contributed $40,300; Desiree 
Maassel, a daughter of Delmar and Yvonne Maassel, contributed $40,300; 
and Emilie Keil contributed $199,200.
    Upon completion of the Anderson Sales, the Plan Parcel lay adjacent 
to the Maassel Parcel and bordered the Maassel Parcel to the north and 
the Maassel Parcel lay adjacent to Fish Lake Beach which bordered the 
Maassel Parcel to the south. Additionally, after the Anderson Sales 
were completed the Plan Trustees and Yvonne Crow each had an ownership 
interest in both the Plan Parcel and the Maassel Parcel.
    The applicant represents that the related investors purchased the 
Maassel Parcel in anticipation of the expansion of Fish Lake Beach's 
operations. The Plan Trustees represent that since its acquisition by 
the Plan, the Plan Parcel has accounted for 57.4% of the Plan's 
unrealized appreciation and 2.5% of the Plan's realized income, as of 
December 31, 1997. \2\
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    \2\ The Department expresses no opinion as to whether the 
purchase and holding of the Plan Parcel by the Plan meets the 
requirements of section 404 of the Act.
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    4. The Plan Trustees represent that the Plan Parcel has generated 
income for the Plan. The Plan Trustees represent that from 1994 to 
1998, the Plan leased the Plan Parcel to Ronald Weidner, an unrelated 
party (the Lease). The Plan Trustees represent that Mr. Weidner used 
the Plan Parcel for farming purposes. As a result, the Plan Trustees 
represent that the Plan has received income totaling $5,864 from the 
Lease.
    The Plan Trustees further represent that the Plan has incurred 
certain holding costs associated with the Plan's ownership of the Plan 
Parcel. The Plan Trustees represent that the total amount of real 
estate taxes on the Plan Parcel was $327.27 since the Plan's 
acquisition. Of this amount, the Plan Trustees represent that Plan has 
paid $103.02 and Fish Lake Beach has paid $224.25.
    5. The Plan Parcel was appraised by Robert Schroeder (Mr. 
Schroeder), the owner of Robert P. Schroeder Appraisals. Mr. Schroeder 
represents that he is a certified real estate appraiser and is 
independent of the Plan. In his appraisal of the Plan Parcel, Mr. 
Schroeder compared the Plan Parcel to five similar properties (the 
Comparable Properties) which were the subject of recent sales. Based on 
his analysis of these recent sales, Mr. Schroeder estimated the value 
of the Plan Parcel to

[[Page 10828]]

be $485,000 (the Appraised Value), as of September 10, 1999.
    Mr. Schroeder additionally represents that the Sale should include 
a price above the Appraised Value because of the ownership by the 
Maassels and Emilie Keil of the Maassel Parcel located adjacent to the 
Plan Parcel (the Assemblage Value). In this regard, Mr. Schroeder 
determined that a premium of 12.5%, or $62,080, should reflect the 
Assemblage Value.
    6. Therefore, the applicant proposes the sale of the Plan Parcel to 
the Keil Trust for the greater of $547,080 ($485,000 + $62,080) or the 
Plan Parcel's fair market value as of the date of the transaction (i.e, 
the Sale). The applicant represents that the Sale is necessary due to a 
liquidity problem facing the Plan in the event the proposed Sale is not 
granted. In this regard, the applicant represents that the Plan is 
facing a potential liquidity problem due to the approaching retirement 
of two of the Plan's participants, Delmar Maassel and Yvonne Maassel.
    The applicant represents that the proposed exemption, if granted, 
is feasible since the Sale would be a one-time transaction for cash. 
The applicant additionally represents that the Sale is in the best 
interests of the Plan's participants and beneficiaries since the Sale 
will provide the Plan with liquidity which will enable the Trustees to 
allocate Plan assets in more suitable investments. The applicant 
represents further that the proposed Sale is appropriate for the Plan 
since the Plan will receive the current fair market value of the Plan 
Parcel without incurring the substantial marketing costs associated 
with a Sale to unrelated third-parties.
    8. In summary, the applicants represent that the subject 
transactions satisfy the statutory criteria contained in section 408(a) 
of the Act and section 4975(c)(2) of the Code for the following 
reasons:
    (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 receives the greater of $547,080 or the fair market 
value of the Plan Parcel as of the date of the Sale; and
    (d) The Plan is not required to pay any commissions, costs or other 
expenses in connection with the Sale.

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

Earl R. Waddell & Sons, Inc. Profit Sharing Plan and Trust (the 
Plan), Located in Fort Worth, Texas

[Application No. D-10730]

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, 32847, August 10, 1990). If the exemption 
is granted, 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 arrangement between the Plan and Earl 
R. Waddell & Sons, Inc. (The Waddell Company) involving the sale (the 
Sale) by the Plan of 5,183.840 shares of the Waddell Holdings Stock to 
the Waddell Company, provided the following conditions are satisfied:
    (A) The Sale price is the greater of $280.29 per share or the 
Waddell Holdings Stock's current fair market value as of the date of 
the Sale;
    (B) The current fair market value of the Waddell Holdings Stock is 
determined by a qualified, independent appraiser;
    (C) The Plan incurs no commissions or expenses associated with the 
Sale;
    (D) The Waddell Company pays in cash to the Plan an additional 
$191,126, an amount equal to an eight percent (8%) per annum rate of 
return on the Waddell Holdings Stock, as converted, for each year the 
Plan owned the Waddell Holdings Stock (the Interest Payment); and
    (E) The Plan's Trustees will not receive any portion of the 
Interest Payment.

Summary of Facts and Representations

    1. The Plan is a defined contribution profit sharing plan having 31 
participants and $221,000 in assets as of June 30, 1999.\3\ The Plan 
was created on July 1, 1962 by the Waddell Company, a manufacturer's 
representative company founded by Earl R. Waddell (Mr. Waddell) and 
located in Fort Worth, Texas. On April 28, 1992, the Waddell Company 
underwent a corporate reorganization (the Reorganization) and the 
Waddell Company became a wholly-owned subsidiary of Waddell Holdings, 
Inc. (Waddell Holdings), a holding company incorporated in the State of 
Texas. In addition to the Waddell Company, Waddell Holdings owns 
subsidiaries engaged in the sales of industrial cutting tools, 
equipment, and supplies, and in the ownership of real estate and 
investment property. After the Reorganization, Waddell Company became, 
and remains, the Plan's sponsor.
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    \3\ In this regard, the applicant represents that the Plan has 
5183.840 shares of common stock of the Waddell Holdings Stock and 
$187 in cash. The Waddell Holdings Stock was valued at $42.60 as of 
June 30, 1999. As such the Plan has a total of $221,000 in Plan 
assets [(5183.840 * 42.60) + 187 = 220,999.84)].
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    2. On December 20, 1988, the Plan purchased 5,719 shares of stock 
(the Original Stock) from the Waddell Company for $280.29 per share 
(the Purchase).\4\ The Original Stock was common stock issued by the 
Waddell Company. The price of the Stock was based on an independent 
appraisal by Clyde Crum (Mr. Crum), a Texas-certified appraiser, for 
Clyde Crum Appraisal Consultants, an appraisal company independent of 
the Plan and the Waddell Company. In his appraisal, Mr. Crum analyzed 
the assets and liabilities of the Waddell Company and determined the 
fair market value of the Waddell Company to be $11,354,000, as of 
October 31, 1988. The applicant represents that, at the time of the 
Plan's acquisition of the Original Stock, the Waddell Company had 
40,507 shares of common stock outstanding resulting in a $280.29 per 
share price for the Original Stock.
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    \4\ The applicant represents that, at the time of the Purchase 
the Original Stock comprised approximately 77% of the Plan's assets. 
The Department expresses no opinion as to whether the acquisition of 
the Original Stock by the Plan meets the requirements of section 
404(a)(1)(B) of the Act.
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    3. The applicant represents that after the Reorganization the 
Original Stock was exchanged for stock (the Exchange) issued by Waddell 
Holdings (i.e., the Waddell Holdings Stock). As a result, after the 
Reorganization, the Plan held 5,719 shares of the Waddell Holdings 
Stock. In this regard, it is represented that the Original Stock and 
the Waddell Holdings Stock are ``qualifying employer securities,'' as 
defined in section 407(d)(5) of the Act.
    On June 30, 1993, the Plan sold 535.160 shares of the Waddell 
Holdings Stock at $280.29 per share to Waddell Holdings (the Prior 
Sale). The applicant represents that the Plan sold the Waddell Holdings 
Stock to enable the Plan to pay benefits to the Plan's participants. 
The applicant states that the Waddell Holdings was unable to obtain an 
appraisal at that time because a pending litigation prevented 
valuations of the Waddell Holdings Stock. Waddell Holdings was able to 
obtain an appraisal as of June 30, 1996,

[[Page 10829]]

valuing the Waddell Holding Stock at $46.50 per share. It is 
represented that the sale by the Plan to Waddell Holdings of the 
Waddell Holdings Stock satisfied the criteria of section 408(e) of the 
Act.\5\
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    \5\ The Department is expressing no opinion as to whether the 
Original Stock and the Waddell Holdings Stock constitute qualifying 
employer securities as defined in Section 407(d)(5) of the Act. 
Further, the Department, herein, expresses no opinion as to whether 
the Purchase, the Exchange, or the Prior Sale satisfied the 
conditions, as set forth under section 408(e) of the Act. 
Accordingly, the Department is not proposing relief for the 
aforementioned transactions.
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    After this sale, the Plan held, and continues to hold, 5,183.840 
shares of the Waddell Holdings Stock.
    4. The applicant proposes the sale by the Plan of the Plan's 
5,183.840 shares of the Waddell Holdings Stock to the Waddell Company 
(i.e., the Sale) for the greater of $1,453,000 ($280.29 per share) or 
the Waddell Holdings Stock's current fair market value as determined by 
an independent appraisal.\6\ The applicant represents that the Waddell 
Holdings Stock currently comprises approximately 100% of the Plan's 
assets and the proposed Sale is necessary for the Plan to pay benefits 
to the Plan's participants and beneficiaries. The applicant represents 
that the proposed Sale is in the best interests of the Plan's 
participants and beneficiaries since the Waddell Holdings Stock 
currently comprises approximately 100% of the Plan's assets and the 
Sale will enable the Plan to diversify its assets. The applicant 
additionally represents that the proposed Sale is administratively 
feasible since the proposed Sale is a one-time transaction for cash in 
which the Plan will not incur any fees or expenses. Finally, the 
applicant represents that the proposed Sale is protective of the Plan 
since the Plan will receive cash equal to the greater of the Waddell 
Holdings Stock's current fair market value or $1,453,000.
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    \6\ The applicant represents that a recent independent appraisal 
on the Waddell Holdings Stock determined its current fair market 
value to be $42.60 per share as of June 30, 1999. As a result, the 
applicant anticipates the Sale to occur at a price exceeding the 
Waddell Holdings Stock's current fair market value. In this regard, 
the applicant represents that the Sale does not violate the 
requirements set forth in section 415 of the Code.
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    The applicant additionally proposes an Interest Payment in cash 
from the Waddell Company to the Plan. In this regard, the applicant 
represents that it is anticipated that the Sale will occur at a price 
which results in a zero rate of return to the Plan despite the Plan's 
ownership of the Waddell Holdings Stock for approximately 11 years. The 
applicant represents that, in the event this proposed transaction is 
granted, the Plan will receive from the Waddell Company cash in the 
amount of $191,126, a sum equal to an 8% rate of return on the Waddell 
Holdings Stock for each Plan year, beginning July 1, 1989. The 
applicant represents that the Interest Payment is due to the Sale 
occurring at a price which provides for a zero percent rate of return 
to the Plan as a result of the Plan's investment in the Waddell 
Holdings Stock. The applicant represents that the Interest Payment will 
be distributed to the account balances of all of the Plan's 
participants with the exception of Marsha Waddell Moller, Mark Waddell, 
Earl R. Waddell, Juanita Waddell, and Allen Waddell.
    5. In summary, the applicant represents that the subject 
transactions satisfy the statutory criteria contained in section 408(a) 
of the Act for the following reasons:
    (A) The Sale price is the greater of $280.29 per share or the 
Waddell Holdings Stock's current fair market value as of the date of 
the Sale;
    (B) The current fair market value of the Waddell Holdings Stock is 
determined by a qualified, independent appraiser;
    (C) The Plan incurs no commissions or expenses associated with the 
Sale; and
    (D) The Waddell Company pays in cash to the Plan an additional 
$191,126, an amount equal to an eight percent (8%) per annum rate of 
return on the Waddell Holdings Stock, as converted, for each year the 
Plan owned the Waddell Holdings Stock (the Interest Payment); and
    (E) The Plan's Trustees will not receive any portion of the 
Interest Payment.

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

Rhode Island Carpenters Local No. 94 Pension Fund (the Pension 
Plan), Rhode Island Carpenters Local No. 94 Apprenticeship Fund 
(the Apprenticeship Plan; Collectively, the Plans), and Rhode 
Island Carpenters Local No. 94 (the Union), Located in Warwick, 
Rhode Island

[Application Nos. D-10739 and L-10740]

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, 32847, August 10, 1990). If the exemption 
is granted, 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: (1) the cash sale (the Parking Lot Sale) of 
improved real property (the Parking Lot) by Rhode Island Carpenters 
Apprenticeship Fund (the Apprenticeship Plan) to the Carpenters Local 
No. 94 (the Union) for the greater of (a) $173,000 or (b) the fair 
market value of the Parking Lot as of the date of the Parking Lot Sale; 
and (2) the cash sale (the Building Sale) of improved real property 
(the Building) by the Rhode Island Carpenters Local No. 94 Pension Fund 
(the Pension Plan) to the Union, for the greater of (a) $777,000 or (b) 
the fair market value of the Building as of the date of the Building 
Sale, provided the following conditions are satisfied:
    (A) the Parking Lot Sale occurs at a price not less than the fair 
market value of the Parking Lot, as determined by a qualified 
independent appraiser;
    (B) the Building Sale occurs at a price not less than the fair 
market value of the Building, as determined by a qualified independent 
appraiser;
    (C) The Building Sale and the Parking Lot Sale (collectively, the 
Sales) are one-time transactions for cash; and
    (D) The Plans pay no fees or commissions in connection with the 
Sales.

Summary of Facts and Representations

    1. The Union is a labor organization located in Warwick, Rhode 
Island. The Union is a sponsor of the Plans.
    2. The Plans are comprised of the Apprenticeship Plan and the 
Pension Plan. The Apprenticeship Plan is a multi-employer 
apprenticeship plan which educates and trains apprentice carpenters in 
Rhode Island. The Apprenticeship Plan had approximately 61 apprentices 
and $636,730 in assets as of December 31, 1998. The Pension Plan is a 
multi-employer pension plan which provides pension benefits to 
carpenters in Rhode Island. The Pension Plan had approximately 2,096 
participants and approximately $102,239,790 in assets as of December 
31, 1998.
    3. On May 22, 1974, the trustees of the Pension Plan (the Pension 
Plan Trustees) established a corporation, Jefferson Park Building, Inc. 
(Jefferson Park), for the purpose of purchasing and owning real estate 
in Rhode Island. On May 29, 1974, the Pension Plan Trustees caused 
Jefferson Park to purchase the Pension Plan Building for $480,000 from 
the Springdale Enterprising Company, an unrelated third party.

[[Page 10830]]

    The Pension Plan Building is located at 14 Jefferson Park Road in 
Warwick, Rhode Island. The Pension Plan Building consists of a 12,600 
square foot, two-story office building located on a 58,172 square foot 
lot. The applicants represent that, since its acquisition, the Pension 
Plan has used a portion of the Pension Plan Building as an 
administrative facility. In addition, the applicants represent that the 
Pension Plan also has leased, and continues to lease, space in the 
Pension Plan Building to the Apprenticeship Plan for use in the 
following: workshops, training, classrooms, and offices. The applicants 
also represent that the Pension Plan leases space in the Pension Plan 
Building to the Union and other related and unrelated parties. \7\
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    \7\ The Pension Plan Trustees represent that the leasing of the 
office space to the Union and Union-sponsored employee benefit plans 
is in accordance with Prohibited Transaction Class Exemption (PTCE) 
76-1, (41 FR 12740, March 26, 1976) and PTCE 77-10 (42 FR 33918, 
July 1, 1997). The Department expresses no opinion herein as to 
whether such transaction complies with the terms and conditions of 
PTCEs 76-1 and 77-10. The Pension Plan Trustees additionally 
represent that the rents at the Pension Plan Building are based on a 
market survey of similar commercial properties in the Warwick, Rhode 
Island area.
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    The applicants represent that the Pension Plan Building has 
generated rental income for the Pension Plan. In this regard, the 
applicants represent that the Pension Plan has generated approximately 
$80,000 per year in rental income since 1974. As a result, the 
applicants represent that the Pension Plan has received a total of 
approximately $2,000,000 in rental income since the Pension Plan 
acquired the Pension Plan Building.
    The applicants additionally represent that the Pension Plan has 
incurred certain expenses as a result of its ownership of the Pension 
Plan Building. These expenses include real estate taxes imposed on the 
Pension Plan Building. In this regard, the applicants represent that 
the Pension Plan has incurred an average of approximately $20,000 per 
year in real estate taxes since 1974. As a result, the applicants 
represent that the Pension Plan has incurred approximately $500,000 in 
real estate taxes since the Pension Plan acquired the Pension Plan 
Building.
    The applicants also represent that the liability insurance on the 
Pension Plan Building for the last twenty-five years averaged 
approximately $4,000 per year, totaling $100,000.
    The Pension Plan additionally incurred certain repair expenses 
associated with the Pension Plan's ownership of the Pension Plan 
Building. In this regard, the applicants represent that although the 
Pension Plan Building has not been expanded, the Pension Plan has 
incurred various expenses in maintaining the Pension Plan Building's 
habitability. These expenses include the replacement of the Pension 
Plan Building's roof in 1989 in the amount of $27,000, and the 
installation of a new heating system in 1988 in the amount of $86,000. 
The applicants represent that other miscellaneous maintenance expenses 
averaged approximately $4,000 per year.
    The applicants represent that the rental income generated from the 
Pension Plan Building far exceeds the sum of the repair costs, real 
estate taxes and liability insurance.\8\
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    \8\ Rental Income ($2,000,000)--Taxes ($500,000)+Liability 
Insurance ($100,000)+Other Expenses 
($27,000+$86,000+$100,000)]=$1,187,000.
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    4. On October 21, 1974, the trustees of the Apprenticeship Plan 
(the Apprenticeship Plan Trustees) established a company, 
Apprenticeship Properties, for the purpose of purchasing and owning 
real estate located in Rhode Island. On October 24, 1974, 
Apprenticeship Properties purchased the Parking Lot from Jay Gar, Inc., 
an unrelated party, for $43,220. The Parking Lot is a 28,812 square 
foot rectangular-shaped asphalt parking lot located adjacent to the 
Pension Plan Building. \9\ The applicants represent that the 
Apprenticeship Plan Trustees purchased the Parking Lot in anticipation 
of the Apprenticeship Plan's construction of an apprentice training 
facility.
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    \9\ The applicants represent that the Pension Plan Building has 
sufficient parking spaces available for the Pension Plan Building's 
tenants and any use of the Apprenticeship Plan Parking Lot by the 
Pension Plan Building's tenants did not result in a benefit to the 
Union or any other party in interest to the Apprenticeship Plan.
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    Since its acquisition, the Apprenticeship Plan has incurred certain 
expenses (the Holding Costs) associated with its ownership of the 
Apprenticeship Plan Parking Lot. The Holding Costs are comprised of 
property taxes imposed on the Parking Lot and improvements made to the 
Parking Lot. In this regard, the applicants represent that the 
Apprenticeship Plan has incurred a total of $52,500 in property taxes 
as a result of its ownership of the Parking Lot. With respect to the 
costs incurred by the Apprenticeship Plan for improvements made to the 
Parking Lot, the applicants represent that the Apprenticeship Plan has 
paid $11,829. The applicants represent that the total cost to the 
Apprenticeship Plan associated with the Apprenticeship Plan's ownership 
of the Parking Lot is $107,549, the sum of the Parking Lot's 
acquisition price ($43,220) and the total Holding Costs ($64,329).
    5. The applicants represent that in 1997 the Pension Plan Trustees 
determined that the Pension Plan Building was not appreciating at a 
satisfactory rate. The applicants represent that the Pension Plan 
Trustees decided to sell the Pension Plan Building and invest the 
proceeds in assets more suitable to the needs of the Pension Plan. The 
applicants represent that on August 18, 1998 the Pension Plan Trustees 
decided to sell the Pension Plan Building to the Union for a price 
equal to the Pension Plan Building's fair market value.
    The applicants additionally represent that the Apprenticeship Plan 
Trustees determined that the Parking Lot was no longer needed for the 
construction of an apprentice training facility. \10\ The applicants 
represent that, due to a downturn in the industry and a decrease in 
apprentices in Rhode Island, the Apprenticeship Plan Trustees 
determined that the construction of an apprenticeship training facility 
should be postponed. The applicants further represent that in July 
1996, the Union became part of the New England Regional Council of 
Carpenters and shortly thereafter the Apprenticeship Plan Trustees 
decided that their apprentices could receive high quality training in a 
cost effective manner at the modern, existing facility of the 
Massachusetts Carpenters Training Program in Milbury, Massachusetts.
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    \10\ The Department expresses no opinion as to whether the 
retention of the Pension Plan Building and Parking Lot for such 
period of time by the Plans meets the requirements of 404(a) of the 
Act.
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    The void filled by the existing facility, the applicants represent, 
prompted the Apprenticeship Plan Trustees to invest in a more liquid 
asset than real estate. Accordingly, the applicants further represent 
that on September 8, 1998, the Apprenticeship Plan Trustees decided to 
sell the Parking Lot to the Union for a price equal to the Parking 
Lot's fair market value.
    6. The Pension Plan Building was appraised by three different 
appraisers. Each appraiser represented that he was independent of the 
Pension Plan and the Union and that his employment and compensation 
were not contingent on the appraised value of the Pension Plan 
Building. Each appraiser additionally represented that he was a Rhode 
Island-certified real estate appraiser.
    The first appraisal was completed on February 3, 1998 by Mr. J. 
Timothy Reiter (Mr. Reiter) for Andolfo Appraisal Associates, an 
appraisal company independent of the Pension Plan, the

[[Page 10831]]

Apprenticeship Plan, and the Union. Mr. Reiter used both the income 
approach and the sales comparison approach and determined the fair 
market value of the Pension Plan Building to be $777,000 as of February 
3, 1998. The second appraisal was completed by Mr. Joseph Accetta (Mr. 
Accetta) for Joseph W. Accetta & Associates, Inc., an appraisal company 
independent of the Pension Plan and the Union. Mr. Accetta used the 
sales comparison approach and compared the Pension Plan Building to 
three similar properties. Based on these comparisons, Mr. Accetta 
determined the fair market value of the Pension Plan Building to be 
$700,000 as of April 6, 1998. The third appraisal was completed by Mr. 
Andrew Carbone (Mr. Carbone) for Carbone & Shand Appraisal, LLC, an 
appraisal company independent of the Pension Plan, the Apprenticeship 
Plan, and the Union. Mr. Carbone used the sales comparison approach and 
compared the Pension Plan Building to four similar properties. Based on 
these comparisons, Mr. Carbone determined the fair market value of the 
Pension Plan Building to be $720,000 as of April 7, 1998.
    Mr. Reiter additionally appraised the Apprenticeship Plan Parking 
Lot. Mr. Reiter used the income approach and determined the fair market 
value of the Apprenticeship Plan Parking Lot to be $173,000 as of 
February 3, 1998. Mr. Carbone also appraised the Apprenticeship Plan 
Parking Lot. Mr. Carbone used the sales comparison approach and 
determined the fair market value of the Apprenticeship Plan Parking Lot 
to be $95,000 as of April 7, 1998.
    7. The applicants proposed the sale of the Pension Plan Building 
from the Pension Plan to the Union (i.e., the Pension Plan Building 
Sale) for $732,333, the average of the three appraisals performed on 
the Pension Plan Building. Additionally, the applicants propose the 
sale of the Apprenticeship Plan Parking Lot from the Apprenticeship 
Plan to the Union (i.e., the Apprenticeship Plan Parking Lot Sale) for 
$134,000, the average of the two appraisals performed on the 
Apprenticeship Plan Parking Lot.
    8. The Department requested that the applicants obtain new or 
updated appraisals due to the disparate range of the various appraisals 
originally submitted by the applicants. Accordingly, the applicants 
retained the services of Mr. Thomas S. Andolfo, MAI, for Andolfo 
Appraisal Associates, an appraisal company independent of the Plans and 
the Union. Mr. Andolfo, in updating the valuation, relied on the direct 
sales comparison approach and determined the fair market value of the 
Pension Plan Building to be $777,000 as of November 1, 1999. Mr. 
Andolfo also updated the appraisal of the Apprenticeship Plan Parking 
Lot. Mr. Andolfo, considered market sales and performed a Land Residual 
Analysis and determined the fair market value of the Apprenticeship 
Plan Parking Lot to be $173,000 as of November 1, 1999. The applicants 
state that these latest figures, which represent the highest appraisal 
values for the Parking Lot and Building, will be used in the Sales.
    9. The applicants represent that, if granted, the proposed Sales 
will be administratively feasible since the Sales will be one-time 
transactions for cash. Additionally, the applicants represent that the 
proposed Sales will be protective of the Plans since the Apprenticeship 
Plan will receive the fair market value of the Apprenticeship Plan 
Parking Lot and the Pension Plan will receive the fair market value of 
the Pension Plan Building. Finally, the applicants represent that the 
proposed Sales are in the best interest of the Plans since the Sales 
will enable the Plans to invest in assets more suitable for the needs 
of the participants and beneficiaries of the Plans.
    10. In summary, the Applicants represent that the proposed 
transaction satisfies the criteria of section 408(a) of the Act 
because:
    (A) the Parking Lot Sale occurs at a price not less than the fair 
market value of the Parking Lot, as determined by a qualified 
independent appraiser;
    (B) the Building Sale occurs at a price not less than the fair 
market value of the Building, as determined by a qualified independent 
appraiser;
    (C) The Building Sale and the Parking Lot Sale (collectively, the 
Sales) are one-time transactions for cash; and
    (D) The Plans pay no fees or commissions in connection with the 
Sales.

FOR FURTHER INFORMATION CONTACT: J. Martin Jara at the United States 
Department of Labor, 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 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 24th day of February, 2000.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 00-4733 Filed 2-28-00; 8:45 am]
BILLING CODE 4510-29-P