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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; Metropolitan Life [Notices] [03/13/2000]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; Metropolitan Life [03/13/2000]

[PDF Version]

Volume 65, Number 49, Page 13326-13335


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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2000-11; Exemption Application No. D-
10721, et al.]

 
Grant of Individual Exemptions; Metropolitan Life

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.

Metropolitan Life Insurance Company (MetLife), Located in New York, 
NY

[Prohibited Transaction Exemption 2000-11; Exemption Application No. D-
10721]

Exemption

Section I. Exemptions Involving the Demutualization of Metlife and the 
Excess Holding of Consideration by Plans Sponsored by Metlife and its 
Affiliates (the MetLife Plans)
    The restrictions of section 406(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 (D) of the Code, shall not apply to 
the receipt, by any eligible policyholder (the Eligible Policyholder) 
of MetLife that is an employee benefit plan (the Plan), subject to 
applicable provisions of the Act and/or the Code, including any 
Eligible Policyholder that is a Plan covering employees of MetLife or 
its affiliates, of an interest (the Interest) in a trust (the Trust), 
whose corpus consists of common stock (the Common Stock) issued by 
MetLife, Inc. (the Holding Company), the parent of MetLife; or (2) the 
receipt of cash or policy credits by such Plans,\1\ in exchange for 
such Eligible Policyholder's membership interest in MetLife, pursuant 
to a plan of conversion (the Plan of Reorganization) adopted by MetLife 
and implemented in accordance with section 7312 of the New York 
Insurance Law.
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    \1\ Unless otherwise noted, the terms ``Plan'' and ``MetLife 
Plan'' are referred to collectively as the ``Plans.''
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    In addition, the restrictions of section 406(a)(1)(E) and (a)(2) 
and section 407(a)(2) of the Act shall not apply to the receipt and 
holding, by a MetLife Plan, of Trust Interests, whose fair market value 
exceeds 10 percent of the value of the total assets held by such Plan.
    The exemptions that are described above are subject to the 
following conditions:
    (a) The Plan of Reorganization is implemented in accordance with 
procedural and substantive safeguards that are imposed under New York 
Insurance Law and is subject to review and approval by the New York 
Superintendent of Insurance (the Superintendent). The Superintendent 
reviews the terms of the options that are provided to Eligible 
Policyholders of MetLife as part of such Superintendent's review of the 
Plan of Reorganization, and the Superintendent only approves the Plan 
of Reorganization following a determination that the Plan is fair and 
equitable to all Eligible Policyholders and is not detrimental to the 
public.
    (b) Each Eligible Policyholder has an opportunity to vote at a 
special meeting to approve the Plan of Reorganization after receiving 
full written disclosure from MetLife.
    (c) One or more independent fiduciaries of a Plan (the Independent 
Fiduciary) that is an Eligible Policyholder receives Trust Interests, 
cash or policy credits pursuant to the terms of the Plan of 
Reorganization and neither MetLife nor any of its affiliates exercises 
any discretion or provides ``investment advice,'' within the meaning of 
29 CFR 2510.3-21(c) with respect to such acquisition.
    (d) In the case of a MetLife Plan, the Independent Fiduciary--
    (1) Votes at the special meeting of Eligible Policyholders to 
approve the Plan of Reorganization;
    (2) Makes any election, to the extent available under the Plan of 
Reorganization, to receive Trust Interests or cash on behalf of the 
MetLife Plan;
    (3) Monitors, on behalf of the MetLife Plan, the acquisition and 
holding of any Trust Interests received;

[[Page 13327]]

    (4) Makes determinations on behalf of the MetLife Plan with respect 
to the voting and the continued holding of Trust Interests by such 
Plan.
    (5) Withdraws shares of Holding Company Common Stock that are held 
in Trust which are equivalent to Trust Interests allocated to a MetLife 
Plan and disposes of such Trust Interests:
    (i) Not exceeding the limits of section 407(a) of the Act in a 
prudent manner.
    (ii) Exceeding the limits of section 407(a) of the Act within six 
months of the initial public offering (the IPO); and
    (6) Provides the Department with a complete and detailed final 
report as it relates to the MetLife Plans prior to the effective date 
of the demutualization.
    (e) Each Eligible Policyholder entitled to receive Trust Interests 
is allocated at least ten shares of Holding Company Common Stock and 
additional consideration may be allocated to Eligible Policyholders who 
own participating policies based on actuarial formulas that take into 
account each participating policy's contribution to the surplus of 
MetLife, which formulas have been reviewed by the Superintendent.
    (f) All Eligible Policyholders that are Plans participate in the 
demutualization transaction on the same basis within their class 
groupings as other Eligible Policyholders that are not Plans.
    (g) No Eligible Policyholder pays any brokerage commissions or fees 
in connection with the receipt of consideration.
    (h) All of MetLife's policyholder obligations remain in force and 
are not affected by the Plan of Reorganization.
    (i) The terms of the transactions are at least as favorable to the 
Plans as an arm's length transaction with an unrelated party.
Section II. Exemptions Involving Sales or Withdrawals Occurring in 
Connection With the Operation or Termination of the Trust
    The restrictions of section 406(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 (D) of the Code, shall not apply to 
the (1) sale by a Plan to the Holding Company of Holding Company Common 
Stock, which is held in the Trust for the benefit of such participating 
Plan and is evidenced by Trust Interests, following the effective date 
of the demutualization or upon the termination of the Trust; and (2) 
the withdrawal by a Plan of Holding Company Common Stock, as evidenced 
by Trust Interests, beginning on the first anniversary of the effective 
date of the demutualization until the termination of the Trust.
    The exemptions are subject to the following conditions:
    (a) The decision by a Plan to arrange for the sale of Holding 
Company Common Stock to the Holding Company or to withdraw Holding 
Company Common Stock is made by a Plan fiduciary which is independent 
of MetLife and its affiliates.
    (b) No Plan pays any fees or commissions in connection with either 
transaction.
    (c) The terms of the transactions are at least as favorable to the 
Plan as those obtainable in an arm's length transaction with an 
unrelated party.
    (d) Any sale of shares of Holding Company Common Stock held in the 
Trust for the benefit of a Plan to the Holding Company is at a price 
reflecting the fair market value of the Common Stock as determined by 
averaging the high and low trading prices as reported on the New York 
Stock Exchange on the day of sale, except that if such sale is pursuant 
to the termination of the Trust, such fair market value is determined 
as the average of the closing price for a share of such Holding Company 
Common Stock for the twenty consecutive trading days ending on the 
third calendar day immediately prior to the date of the sale.
Section III. Definitions
    For purposes of this exemption:
    (a) The term ``MetLife'' means Metropolitan Life Insurance Company 
and any affiliate of MetLife as defined in paragraph (b) of this 
Section III.
    (b) An ``affiliate'' of MetLife includes--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with MetLife. (For purposes of this paragraph, the term ``control'' 
means the power to exercise a controlling influence over the management 
or policies of a person other than an individual.); and
    (2) Any officer, director or partner in such person.
    (c) The term ``Eligible Policyholder'' means a policyholder whose 
name appears on MetLife's records as the owner of a policy on the 
adoption date of MetLife's Plan of Reorganization by MetLife's Board of 
Directors and, which is in full force for its full basic benefits and 
has not matured by death or otherwise been surrendered or terminated.
    (d) The term ``policy credit'' means (1) an increase in 
accumulation value, to which the Company will apply no sales, surrender 
charges, or that will be further increased in value to offset any of 
these charges, under a policy that is a deferred annuity; (2) an 
increase in the amount of the payments distributed under a policy that 
is in the course of annuity payments; (3) additional insurance or 
dividends with interest, as appropriate (depending upon whether the 
additional insurance option or the dividends with interest option has 
been selected with respect to the underlying policy, provided that 
dividends with interest will apply where an option other than 
additional insurance or dividends with interest has been selected), 
under a policy that is a life insurance policy; or (4) an increase in 
the retired lives reserve, under a policy that is a life or health 
insurance funding account or a guaranteed life insurance funding 
account.
    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 (the Notice) that was published on 
November 24, 1999 at 64 FR 66201.

Written Comments

    The Department received 25 written comments with respect to the 
Notice. Twenty-four comments were submitted by Eligible Policyholders 
of MetLife and one comment was submitted by MetLife.
    Of the Eligible Policyholder comments received, one commenter was 
in favor of the exemption and urged the Department to grant it. Six 
commenters requested general information that was not relevant to the 
exemption and their comments were, in turn, forwarded to appropriate 
personnel within MetLife for response.
    Seventeen commenters said they were opposed to the exemption for 
various reasons. These commenters questioned whether the exemption 
would have an adverse impact upon their benefits or they expressed 
general dissatisfaction with the demutualization concept or with the 
insurer. Because many of the comment letters presented similar issues, 
particularly the effect of the demutualization on policyholder 
benefits, the Department forwarded a representative sample to MetLife 
for response.
    In its comment, MetLife requested clarification to the Notice. The 
comment also sought to expand on the description of the transactions 
described in the Notice and the Summary of Facts and Representations 
(the Summary).
    Discussed below are the substantive comments that were submitted by 
the Eligible Policyholders as well as MetLife's responses to the 
comment letters. Also discussed is MetLife's comment and the 
Department's responses to specific areas of technical

[[Page 13328]]

clarification in the Notice and the Summary.

Eligible Policyholder Comments

    As noted above, a number of commenters said they were opposed to 
the exemption because they believed it might affect their policyholder 
benefits adversely or, as one commenter stated, ``relieve those in 
charge of the plan from the obligations of ERISA.''
    In response, MetLife asserts that the comments have nothing to do 
with the merits of the exemption. Instead, MetLife explains that the 
commenters had an ample opportunity to express their concerns at the 
policyholder hearing that was held on January 24, 2000. In addition, 
MetLife states that the concerns of these policyholders have been 
addressed in the ``Policyholder Information Booklet, Part I,'' which 
was mailed to all Eligible Policyholders. According to MetLife, in that 
booklet, it is clearly stated that ``Your policy benefits, values, 
guarantees and dividend eligibility will not be reduced, and your 
policy premiums will not be increased, in any way, due to the 
demutualization.''

MetLife's Comments

    1. Duties of the Independent Fiduciary. On page 66202 of the 
Notice, Section I(d) sets forth the duties of State Street Bank and 
Trust Company (State Street), the independent fiduciary for the MetLife 
Plans. MetLife states that it is its understanding that State Street's 
duty to continue to monitor a MetLife Plan's holding of Trust Interests 
or Holding Company Common Stock will exist only so long as the MetLife 
Plan's holding is in excess of the 10 percent limitation in section 
407(a) of the Act. Once a MetLife Plan's holdings have been reduced to 
below this limit, which must occur within six months of the initial 
public offering (the IPO), MetLife notes that State Street's oversight 
activities will cease.
    The Department wishes to confirm MetLife's understanding of the 
role of State Street as independent fiduciary for the MetLife Plans.
    2. Eligible Policyholder Consideration. On page 66202 of the 
Notice, paragraph (e) of Section I provides for the allocation of 
Holding Company Common Stock to Eligible Policyholders among the fixed 
and variable components. However, MetLife represents that it would be 
more accurate to reword this condition as follows since not all 
policyholders who receive the fixed component of compensation will also 
receive the variable component:

    (e) Each Eligible Policyholder entitled to receive Trust 
Interests is allocated at least ten shares of Holding Company Common 
Stock, and additional consideration may be allocated to Eligible 
Policyholders who own participating policies based on actuarial 
formulas that take into account each participating policy's 
contribution to the surplus of MetLife, which formulas have been 
reviewed by the Superintendent.

MetLife points out that the same comment is applicable to 
Representation 9(d) of the Summary.
    In response to this clarification, the Department has made the 
requested revisions to the Notice and the Summary.
    3. MetLife Definition. On page 66202 of the Notice, Section III(a) 
in part, defines the term ``MetLife'' as ``The MetLife Insurance 
Company.'' However, MetLife requests that the article ``The,'' be 
deleted from the term and in response to this comment, the Department 
has made the requested revision.
    4. Affiliate Definition. On page 66202 of the Notice, paragraph (b) 
defines the term ``affiliate'' of MetLife to include--

    (1) Any person directly or indirectly through one or more 
intermediaries, controlling controlled by, or under common control 
with MetLife; (For purposes of this paragraph, the term ``control'' 
means the power to exercise a controlling influence over the 
management or policies of a person other than an individual.)
    (2) Any officer, director or partner in such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director or a 5 percent partner or owner.

While Metlife concedes that subparagraphs (1) and (2) of the definition 
are acceptable, that portion of subparagraph (3) which includes an 
entity in which MetLife holds an interest of 5 percent or more is too 
broad. In preparing the list of MetLife Plans, MetLife states that it 
included Plans of entities in which it owned a 50 percent or greater 
interest. If it were required to use the 5 percent threshold, MetLife 
states that the list of Plans would have to include Plans of companies 
in which it holds a minority (but greater than 5 percent) interest. In 
many cases, MetLife represents that it has no knowledge of these Plans, 
and as a minority owner, has no control over them. Accordingly, MetLife 
requests that the Department delete subparagraph (3) from the 
definition. MetLife notes that subparagraph (1) would still pick up the 
majority-owned subsidiaries whose Plans are already included in the 
schedule of the MetLife Plans supplied to the Department.
    The Department concurs with this comment and has made the requested 
modification.
    5. Eligible Policyholder Definition. On page 66202 of the Notice, 
paragraph (c) of Section III defines the term ``Eligible Policyholder'' 
as --

    * * * a policyholder whose name appears on MetLife's records as 
the owner of a policy on the adoption date of MetLife's Plan of 
Reorganization by MetLife's Board of Directors, which is in full 
force for its full basic benefits and has not matured by death or 
otherwise been surrendered or terminated and which remains in force 
on the effective date of MetLife's demutualization.

    MetLife notes that the definition ends with the phrase ``and which 
remains in force on the effective date of MetLife's demutualization.'' 
However, MetLife wishes to clarify that New York law was recently 
amended to eliminate the requirement that the policy remain in force 
until the effective date to be eligible. Therefore, MetLife states that 
its Plan of Reorganization now provides that a policy which was in 
force on the adoption date (September 28, 1999) will be eligible even 
if it does not remain in force until the effective date.
    In response, the Department has considered this clarification and 
has made the requested modification to the Notice.
    6. Policy Credit Definition. On page 66202 of the Notice, paragraph 
(d) of Section III defines the term ``policy credit'' as --

    * * * (1) a dividend deposit or dividend addition; (2) an 
increase in accumulation value (to which no sales or surrender or 
similar charges shall be applied); (3) additional coverage or 
benefits; (4) an extension of the expiry date; or (5) a reduction in 
premium payments.

MetLife represents that the definition of the term ``policy credit'' in 
the Notice is a somewhat simplified version. Therefore, it requests 
that the term as defined in the Plan of Reorganization, which is stated 
as follows, be substituted:

    * * * (1) an increase in accumulation value, to which the 
Company will apply no sales, surrender charges, or that will be 
further increased in value to offset any of these charges, under a 
policy that is a deferred annuity; (2) an increase in the amount of 
the payments distributed under a policy that is in the course of 
annuity payments; (3) additional insurance or dividends with 
interest, as appropriate (depending upon whether the additional 
insurance option or the dividends with interest option has been 
selected with respect to the underlying policy, provided that 
dividends with interest will apply where an option

[[Page 13329]]

other than additional insurance or dividends with interest has been 
selected), under a policy that is a life insurance policy; or (4) an 
increase in the retired lives reserve,\2\ under a policy that is a 
life or health insurance funding account or a guaranteed life 
insurance funding account.

    \2\ MetLife represents that the phrase ``retired lives reserve'' 
refers to a reserve which is part of a group term life or health 
insurance policy by which monies are set aside under the policy for 
the payment of future premiums for eligible retirees covered under 
the policy.

    In response, the Department has revised the definition of the term 
``policy credit'' to reflect the version set forth in MetLife's final 
Plan of Reorganization.
    7. Trust Corpus. On page 66203 of the Notice, the first sentence of 
Representation 5 of the Summary provides, in part, that MetLife will 
establish the Trust ``to hold shares of Holding Company Common Stock 
that are received by millions of policyholders under its Plan of 
Reorganization.'' For the sake of accuracy, MetLife states that this 
clause should be revised to state that the Trust will hold shares of 
Holding Company Common Stock that are allocated to policyholders since 
the policyholders will not actually ``receive'' the shares unless and 
until they are withdrawn from the Trust.
    The Department concurs with this comment and has revised the first 
sentence of Representation 5.
    8. Miscellaneous Changes/Clarifications. On page 66204 of the 
Notice, in the third paragraph of Representation 7 of the Summary, 
MetLife points out that the proper spelling of the Superintendent's 
actuarial adviser is ``Milliman & Robertson'' and not ``Miliman & 
Robertson.'' Similarly, on page 66204 of the Notice, in Representation 
8 of the Summary, the parenthetical in the first sentence of the fourth 
paragraph should read ``(approximately 11.1 million in the case of 
MetLife) instead of ``(approximately 16 million in the case of 
MetLife).'' Finally, on page 66205 of the Notice, in Representation 9, 
Footnote 5 of the Summary states that the special policyholder meeting 
will be held ``in early January 2000.'' However, MetLife wishes to 
clarify that the public hearing occurred on January 24, 2000 and the 
policyholder vote took place on February 7, 2000.
    The Department notes these clarifications.
    9. Canadian Policies. On page 66205 of the Notice, in 
Representation 10 of the Summary, Footnote 6 describes the status of 
certain former Canadian policyholders of MetLife. To clarify the status 
of these policies, MetLife states that in July 1998, it sold a 
substantial portion of its Canadian operations to Clarica Life 
Insurance Company (Clarica Life). As part of that sale, MetLife 
explains that a large block of policies in effect with MetLife in 
Canada were transferred to Clarica Life and the holders of the 
transferred Canadian policies became policyholders of Clarica Life. 
MetLife indicates that the transferred policyholders are no longer 
MetLife policyholders and, therefore, are not entitled to compensation 
under the Plan of Reorganization.
    However, as a result of a commitment made in connection with 
obtaining Canadian regulatory approval of that sale, if it 
demutualizes, MetLife states that its Canadian branch will make cash 
payments to those who are, or are deemed to be, holders of these 
transferred Canadian policies. MetLife notes that the payments will be 
determined in a manner that is consistent with the treatment of, and 
will be fair and equitable to, Eligible Policyholders. Further, MetLife 
states that the process of the IPO and any Other Capital Raising 
Transactions must be sufficient to reimburse MetLife for those 
payments.
    Also in Representation 10, MetLife states that there is language 
describing how the shares of policyholders who elect to be cashed out 
will be sold to the Holding Company and the proceeds distributed to 
those policyholders. MetLife states that it is now contemplated that no 
shares of Holding Company Common Stock will be issued with respect to 
such policyholders. Instead, ``cash for cash-outs'' will be funded by 
the IPO or ``Other Capital Raising Transactions,'' a term defined in 
the Plan of Reorganization. MetLife adds that the Holding Company will 
always purchase Holding Company Common Stock at its discretion and it 
will not purchase such shares to provide cash for cash-outs. Instead, 
cash for cash-outs will be raised through the IPO or Other Capital 
Raising Transactions.
    Further, the first paragraph of Representation 10 lists those 
categories of policyholders entitled to receive consideration in the 
form of cash. However, MetLife wishes to clarify that aside from the 
listed categories, the following category of policyholders is also 
entitled to receive cash:

Each group Eligible Policyholder that (a) is an owner of a policy 
that is an individual retirement annuity within the meaning of 
section 408 or 408A of the Code or a tax-sheltered annuity within 
the meaning of section 403(b) of the Code, and (b) has affirmatively 
made an election to receive cash in lieu of Trust Interests on a 
form approved by the Superintendent that has been provided to such 
Eligible Policyholder pursuant to Section 5.5(b) (of the Plan of 
Reorganization) and has been properly completed and received by 
MetLife prior to the date set by the MetLife, but only with respect 
to such policy.

    Additionally, in Representation 10, MetLife requests that the 
description of the categories of policies which will receive 
compensation in the form of policy credits be revised to more 
accurately read as follows:

* * * Further, MetLife will allocate policy credits to (a) each 
owner of a policy this is an individual retirement annuity within 
the meaning of section 408A of the Code or a tax-sheltered annuity 
within the meaning of section 403(b) of the Code; (b) each owner of 
a policy that is an individual annuity contract that has been issued 
pursuant to a Plan qualified under section 401(a) or 403(a) of the 
Code directly to the Plan participant; (c) each owner of a policy 
that is an individual life insurance policy that has been issued 
pursuant to a Plan qualified under section 401(a) or 403(a) of the 
Code directly to the Plan participant; and (d) each owner of a 
policy that is a life or health insurance funding account or 
guaranteed life insurance funding account.

    Finally, in Representation 10, Footnote 6 describes the possible 
limits on cash compensation. MetLife requests that the second bullet be 
revised to read as follows:

    <bullet> Each group Eligible Policyholder that elects to receive 
cash and is allocated not more than 25,000 shares will receive 
compensation in the form of cash.

Immediately following this bullet, MetLife also requests that a third 
bullet be added which would read:

    <bullet> Each group Eligible Policyholder that elects to receive 
cash and is allocated more than 25,000 shares will receive 
compensation in the form of--

    The Department acknowledges these comments and has made the 
requested revisions.
    10. Holding Company Common Stock Held in the Trust. On page 66206 
of the Notice, the third sentence in the second paragraph of 
Representation 11 states, in pertinent part, that ``shares allocated to 
the Trust Beneficiary will continue to be held in the Trust until such 
Trust Beneficiary decides to withdraw allocable shares of Holding 
Company Common Stock for sale.'' MetLife wishes to emphasize that after 
one year from the effective date of the demutualization, shares may be 
withdrawn for any reason.
    Also in Representation 11, Footnote 8 refers to Section 3.4(b) of 
the draft Trust Agreement. MetLife states that the

[[Page 13330]]

reference should be to Section 4.2 of the Trust Agreement which governs 
the transfer of Trust Interests.
    The Department notes these changes.
    11. The Purchase and Sale Program. On page 66206 of the Notice, 
Representation 12 of the Summary describes the Purchase and Sale 
Program which will be established by the Holding Company following the 
completion of the IPO for each beneficiary of the Trust (the Trust 
Beneficiary). MetLife wishes to modify the fourth sentence in the 
second bullet point to read ``Following any partial withdrawal for 
sale, the Trust Beneficiary must still hold at least 100 Trust 
Interests.''
    MetLife also notes that purchases under the Purchase and Sale 
Program will not begin until the first trading day following the 90th 
day after the effective date of the Plan of Reorganization, and that 
MetLife expects that sales will not begin until approximately 30 days 
after the effective date.
    Finally, in the third sentence of the third full paragraph of 
Representation 12 the parenthetical reads ``(Accordingly, the Trust 
Beneficiary will receive the same consideration for its shares whether 
they are purchased by the Holding Company or by an unrelated party on 
the open market.)'' MetLife wishes to point out that this will not be 
the case for all sales. If the sale is on the open market, MetLife 
represents that the Trust Beneficiary will receive consideration equal 
to the weighted average price for all shares of Holding Company Common 
Stock that are held by the Trust (the Trust Shares) which are sold on 
that day. If the sale is to the Holding Company, MetLife explains that 
the consideration will be equal to the weighted average of the high and 
low trading prices of the shares for the date of the sale. Further, 
MetLife notes that these formulas are designed to provide an average 
market price for the day, but will not necessarily be the same as the 
price involved for each trade occurring on that day.
    The Department notes these clarifications to Representation 12.
    Also on page 66206 of the Notice, Representation 13 of the Summary 
describes the purchase aspect of the Purchase and Sale Program. 
However, MetLife states that this description can be further clarified. 
In this regard, MetLife points out that generally, Trust Beneficiaries 
with fewer than 1,000 Trust Interests may purchase additional shares of 
Holding Company Common Stock (to be held in the Trust) to increase 
their Trust Interests up to 1,000. Trust Beneficiaries must purchase at 
least $250 worth of shares or a smaller amount required to purchase up 
to the 1,000 maximum number of Trust Interests. Therefore, MetLife 
explains that ``multiple of 100'' rule is not part of the purchase side 
of the Purchase and Sale Program.
    The Department has considered this clarification and has revised 
Representation 13 to reflect this change.
    12. Shareholder Number. On page 66207 of the Notice, in 
Representation 14, the first sentence of Footnote 10 states that 
``MetLife projects that the initial number of shareholders of the 
Holding Company may exceed 10 million.'' MetLife states that it would 
be more accurate to revise this sentence to read as follows: ``MetLife 
projects that, if the Trust mechanism were not used, the initial number 
of shareholders of the Holding Company could exceed 10 million.''
    The Department notes this revision and has made the requested 
modification.
    13. Dividend Distribution. On page 66207 of the Notice, 
Representation 15 describes the method of distributing dividends on 
Trust Shares which are paid to the Trustee. MetLife notes that the 
Trust Agreement also permits the Trustee to arrange with the Holding 
Company for the direct payment by the Holding Company of cash dividends 
to the Trust Beneficiaries at the same time as the payment of dividends 
to the Holding Company stockholders. Therefore, it wishes to clarify 
that the Holding Company intends to declare annual cash dividends, 
subject to the discretion of its Board of Directors, and to distribute 
them directly to the Trust Beneficiaries, as permitted by this 
provision.
    The Department notes this clarification.
    14. Matters for Trust Beneficiary Voting. On page 66207 of the 
Notice, the first sentence in the first paragraph of Representation 16 
lists matters on which Trust Beneficiaries would be entitled to direct 
the Trustee how to vote shares of Holding Company Common Stock. 
However, MetLife wishes to expand the list to include * * * any merger 
or consolidation, a sale, lease or exchange of all or substantially all 
of the assets of the Holding Company, or a recapitalization or 
dissolution of the Holding Company * * *'' MetLife states that this 
provision would require a vote under applicable Delaware law.
    In addition, the second through fourth sentences of the first 
paragraph of Representation 16 provide that the Trustee will vote all 
shares of Holding Company Common Stock that is held in Trust in 
proportion to the instructions received from Trust Beneficiaries which 
give such instructions unless the issue is a choice of competing 
candidates for director positions and Trust Beneficiaries representing 
20 percent or fewer of the Trust Interests provide instructions. Then, 
the Trustee will vote only the shares of Holding Company Common Stock 
that are equal in number to the number of Trust Interests held by Trust 
Beneficiaries which provide instructions.
    MetLife wishes to point out that the exception relating to when 
fewer than 20 percent of the Trust Beneficiaries provide instructions, 
has been deleted.
    Finally, the third paragraph of Representation 16 discusses the 
termination of the Trust and provides that a Trust Beneficiary will 
have the option of receiving shares of allocable Holding Company Common 
Stock in-kind or receiving cash as a result of the sale of such Stock 
to the Holding Company. MetLife wishes to emphasize that upon 
termination of the Trust, a Trust Beneficiary will have the option of 
receiving shares in-kind or cash only if the Holding Company, in its 
sole discretion, elects to purchase all or a portion of the shares.\3\
---------------------------------------------------------------------------

    \3\ MetLife represents that it has not yet formulated procedures 
which will govern the possible purchase of Holding Company Common 
Stock upon the termination of the Trust. MetLife explains that there 
may be reasons why such purchase will not be strictly pro rata. For 
example, the Holding Company may wish to buy out odd lot holders 
first, or buy out holders who own more than (or less than) a certain 
number of shares. However, Metlife further explains that the result 
should not result in discrimination among Trust Beneficiaries since 
those who are not bought out by the Holding Company may sell their 
shares of Common Stock on the open market for fair market value.
---------------------------------------------------------------------------

    In response, the Department has revised Representation 16 in light 
of these modifications.
    15. MetLife's Ownership Interest in State Street. On page 66208 of 
the Notice, the fourth paragraph of Representation 17 of the Summary 
states, in part, that MetLife ``does not have an ownership interest'' 
in State Street. MetLife explains that this sentence should be read to 
mean an ownership interest other than the very minor one (i.e., MetLife 
holds approximately .005962 of the total outstanding shares of State 
Street) which is described in the immediately preceding paragraph 
involving separate accounts.
    The Department notes this clarification and has added the 
parenthetical ``(other than a negligible one),'' after the phrase 
``ownership interest in State Street'' and before the word ``nor.''

[[Page 13331]]

    16. Preliminary Review/MetLife Plans. On page 66208 of the Notice, 
the final sentence of Representation 18 states that ``MetLife'' rather 
than ``State Street'' has conducted a preliminary review of the Plan of 
Reorganization. The Department notes this error and has revised the 
sentence, accordingly.
    Finally, MetLife states that it has come to its attention that 
seven in-house Plans of a MetLife subsidiary, New England Life 
Insurance Company, as well as one in-house Plan of another subsidiary, 
Fulcrum Financial Advisors, hold policies which may be eligible to 
receive compensation in the demutualization.\4\ MetLife points out that 
State Street will act on behalf of these MetLife Plans and State Street 
has confirmed that it will undertake independent fiduciary 
responsibilities on behalf of these Plans.
---------------------------------------------------------------------------

    \4\ These MetLife Plans include The New England Benefit Plan for 
the Field Force; The New England Benefit Plan, The New England 
401(k) Plan and Trust; The New England Retirement Plan and Trust; 
The New England Agents' Retirement Plan and Trust; The New England 
Agents' Deferred Compensation Plan and Trust; The New England Agency 
Employees' Retirement Plan and Trust; and Fulcrum Financial Advisors 
401(k) Plan.
---------------------------------------------------------------------------

    For further information regarding the comments and other matters 
discussed herein, interested persons are encouraged to obtain copies of 
the exemption application file (Exemption Application No. D-10721) 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 Documents Room of 
the Pension and Welfare Benefits Administration, Room N-5638, U.S. 
Department of Labor, 200 Constitution Avenue, NW, Washington, D.C. 
20210.
    Accordingly, after giving full consideration to the entire record, 
including the written comments, the Department has decided to grant the 
exemption subject to the modifications and clarifications described 
above.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

First American Capital Management, Inc. (FACM), Located in Newport 
Beach, California

[Prohibited Transaction Exemption No. 2000-12; Exemption Application 
No. D-10819]

Exemption

Section I--Definitions and Special Rules
    The following definitions and special rules will apply to this 
exemption:
    (a) The term ``person'' includes the person and affiliates of the 
person.
    (b) An ``affiliate'' of a person includes the following:
    (1) Any person directly or indirectly controlling, controlled by, 
or under common control with, the person;
    (2) Any officer, director, partner, employee, relative (as defined 
in section 3(15) of the Act), brother, sister, or spouse of a brother 
or sister, of the person; and
    (3) Any corporation or partnership of which the person is an 
officer, director or partner.
    A person is not an affiliate of another person solely because one 
of them has investment discretion over the other's assets. The term 
``control'' means the power to exercise a controlling influence over 
the management or policies of a person other than an individual.
    (c) An ``affiliate of FACM'' includes Pacific American Securities, 
LLC, (PAS) and any other broker-dealer registered under the Securities 
Exchange Act of 1934 with respect to which FACM has at least a 40 
percent minority ownership interest and which is subject to regulations 
similar to those to which PAS is subject (such entities referred to 
collectively herein as ``FACM'').
    (d) An ``agency cross transaction'' is a securities transaction in 
which the same person acts as agent for both any seller and any buyer 
for the purchase or sale of a security.
    (e) The term ``covered transaction'' means an action described in 
section II(a), (b), or (c) of this exemption.
    (f) The phrase ``effecting or executing a securities transaction'' 
means the execution of a securities transaction as agent for another 
person and/or the performance of clearance, settlement, custodial or 
other functions ancillary thereto.
    (g) A Plan fiduciary is independent of a person only if the 
fiduciary has no relationship to or interest in such person that might 
affect the exercise of such fiduciary's best judgment as a fiduciary.
    (h) The term ``profit'' includes all charges relating to effecting 
or executing securities transactions, less reasonable and necessary 
expenses including reasonable indirect expenses (such as overhead 
costs) properly allocated to the performance of these transactions 
under generally accepted accounting principles.
    (i) The term ``securities transaction'' means the purchase or sale 
of securities.
    (j) The term ``nondiscretionary trustee'' of a Plan means a trustee 
or custodian whose power and duties with respect to any assets of the 
Plan are limited to (1) the provision of nondiscretionary trust 
services to the Plan, and (2) duties imposed on the trustee by any 
provision or provisions of the Act or the Code. The term 
``nondiscretionary trust services'' means custodial services and 
services ancillary to custodial services, none of which services are 
discretionary. For purposes of this exemption, a person does not fail 
to be a nondiscretionary trustee solely by reason of having been 
delegated, by the sponsor of a master or prototype Plan, the power to 
amend such Plan.
Section II--Covered Transactions
    If each condition of Section III of this exemption is either 
satisfied or non-applicable under Section IV, the restrictions of 
section 406(b) of the Act and the sanctions resulting from the 
application of sections 4975(a) and (b) of the Code, by reason of 
section 4975(c)(1)(E) or (F) of the Code, shall not apply to--
    (a) First American Capital Management (FACM) using its authority to 
cause an employee benefit plan (a ``Plan'') to pay a fee to PAS, or 
another affiliate of FACM, for effecting or executing securities 
transactions as an agent for the Plan, but only to the extent that such 
transactions are not excessive under the circumstances, in either 
amount or frequency;
    (b) FACM acting through PAS, or another affiliate of FACM, as an 
agent in an agency cross transaction for both a Plan with respect to 
which FACM is a fiduciary and one or more other parties to the 
transaction; or (c) The receipt by FACM, through its affiliates, of 
reasonable compensation for effecting or executing an agency cross 
transaction in which a Plan is a party from one or more other parties 
to the transaction.
Section III--Conditions
    Except to the extent otherwise provided in Section IV of this 
exemption, Section II of this exemption applies only if the following 
conditions are satisfied:
    (a) The person engaging in the covered transaction is not a trustee 
(other than a nondiscretionary trustee) or an administrator of the 
Plan, or an employer any of whose employees are covered by the Plan.
    (b) The covered transaction is performed under a written 
authorization executed in advance by a fiduciary of each Plan whose 
assets are involved in the transaction, which Plan fiduciary is 
independent of FACM.
    (c) The authorization referred to in paragraph (b) of this section 
is terminable at will by the Plan, without penalty to the Plan, upon 
receipt by

[[Page 13332]]

FACM of written notice of termination. A form expressly providing an 
election to terminate the authorization described in paragraph (b) of 
this section with instructions on the use of the form must be supplied 
to the authorizing fiduciary no less than annually. The instructions 
for such form must include the following information:
    (1) The authorization is terminable at will by the Plan, without 
penalty to the Plan, upon receipt by FACM of written notice from the 
authorizing fiduciary or other Plan official having authority to 
terminate the authorization; and
    (2) Failure to return the form will result in the continued 
authorization of FACM to engage in the covered transactions on behalf 
of the Plan.
    (d) Within three (3) months before an authorization is made, the 
authorizing fiduciary is furnished with any reasonably available 
information that FACM reasonably believes to be necessary for the 
authorizing fiduciary to determine whether the authorization should be 
made, including (but not limited to) a copy of this exemption, the form 
for termination of authorization described in Section II(c), a 
description of FACM's brokerage placement practices, and any other 
reasonably available information regarding the matter that the 
authorizing fiduciary requests.
    (e) FACM furnishes the authorizing fiduciary with either:
    (1) a confirmation slip for each securities transaction underlying 
a covered transaction within ten (10) business days of the securities 
transaction containing the information described in Rule 10b-10(a)(1-7) 
under the Securities Exchange Act of 1934, 17 CFR 240.10b-10; or
    (2) at least once every three (3) months, and not later than 45 
days following the period to which it relates, a report disclosing:
    (A) a compilation of the information that would be provided to the 
Plan pursuant to subparagraph (e)(1) of this Section during the three-
month period covered by the report;
    (B) the total of all securities transaction-related charges 
incurred by the Plan during such period in connection with such covered 
transactions; and
    (C) the amount of the securities transaction-related charges 
retained by FACM and the amount of such charges paid to other persons 
for execution or other services.
    For purposes of this paragraph (e), the words ``incurred by the 
Plan'' shall be construed to mean ``incurred by the pooled fund'' when 
FACM engages in covered transactions on behalf of a pooled fund in 
which the Plan participates.
    (f) The authorizing fiduciary is furnished with a summary of the 
information required under paragraph (e)(1) at least once per year. The 
summary must be furnished within 45 days after the end of the period to 
which it relates, and must contain the following:
    (1) the total of all securities transaction-related charges 
incurred by the Plan during the period in connection with covered 
securities transactions;
    (2) the amount of the securities transaction-related charges 
retained by FACM and the amount of these charges paid to other persons 
for execution or other services;
    (3) A description of FACM's brokerage placement practices, if such 
practices have materially changed during the period covered by the 
summary;
    (4) (i) A portfolio turnover ratio, calculated in a manner which is 
reasonably designed to provide the authorizing fiduciary with the 
information needed to assist in discharging its duty of prudence. The 
requirements of this subparagraph (f)(4)(i) will be met if the 
``annualized portfolio turnover ratio,'' calculated in the manner 
described in subparagraph (f)(4)(ii), is contained in the summary;
    (ii) The ``annualized portfolio turnover ratio'' shall be 
calculated as a percentage of the Plan assets consisting of securities 
or cash over which FACM had discretionary investment authority, or with 
respect to which FACM rendered, or had any responsibility to render, 
investment advice (the ``portfolio'') at any time or times 
(``management period(s)'') during the period covered by the report. 
First, the ``portfolio turnover ratio'' (not annualized) is obtained by 
dividing (A) the lesser of the aggregate dollar amounts of purchases or 
sales of portfolio securities during the management period(s) by (B) 
the monthly average of the market value of the portfolio securities 
during all management period(s). Such monthly average is calculated by 
totaling the market values of the portfolio securities as of the 
beginning and end of each management period and as of the end of each 
month that ends within such period(s), and dividing the sum by the 
number of valuation dates so used. For purposes of this calculation, 
all debt securities whose maturities at the time of acquisition were 
one year or less are excluded from both the numerator and the 
denominator.
    The ``annualized portfolio turnover ratio'' is then derived by 
multiplying the ``portfolio turnover ratio'' by an annualizing factor. 
The annualizing factor is obtained by dividing (C) the number twelve 
(12) by (D) the aggregate duration of the management period(s) 
expressed in months (and fractions thereof).
    (iii) The information described in this paragraph (f)(4) is not 
required to be furnished in any case where FACM has not exercised 
discretionary authority over trading in the Plan's account during the 
period covered by the report.
    For purposes of this paragraph (f), the words ``incurred by the 
Plan'' shall be construed to mean ``incurred by the pooled fund'' when 
FACM engages in covered transactions on behalf of a pooled fund in 
which the Plan participates.
    (g) If an agency cross transaction to which Section IV(b) does not 
apply is involved, the following conditions must also be satisfied:
    (1) The information required under Sections III(d) or IV(d)(1)(B) 
of this exemption includes a statement to the effect that, with respect 
to agency cross transactions, FACM will have a potentially conflicting 
division of loyalties and responsibilities regarding the parties to the 
transactions;
    (2) The summary required under Section III(f) of this exemption 
includes a statement identifying the total number of agency cross 
transactions during the period covered by the summary and the total 
amount of all commissions or other remuneration received or to be 
received from all sources by FACM in connection with those transactions 
during the period;
    (3) FACM has the discretionary authority to act on behalf of, and/
or provide investment advice to, either (A) one or more sellers or (B) 
one or more buyers with respect to the transaction, but not both;
    (4) The agency cross transaction is a purchase or sale, for no 
consideration other than cash payment against prompt delivery of a 
security for which market quotations are readily available; and
    (5) The agency cross transaction is executed or effected at a price 
that is at or between the independent bid and independent ask prices 
for the security prevailing at the time of the transaction.
Section IV--Exceptions From Conditions
    (a) Certain plans not covering employees. Section III does not 
apply to covered transactions to the extent they are engaged in on 
behalf of individual retirement accounts (IRAs) meeting the conditions 
of 29 CFR 2510.3-2(d), or Plans, other than training programs, that

[[Page 13333]]

cover no employees within the meaning of 29 CFR 2510.3-3.
    (b) Certain agency cross transactions. Section III of this 
exemption does not apply in the case of an agency cross transaction, 
provided that FACM:
    (1) does not render investment advice to any Plan for a fee within 
the meaning of section 3(21)(A)(ii) of the Act with respect to the 
transaction;
    (2) is not otherwise a fiduciary who has investment discretion with 
respect to any Plan assets involved in the transaction (see 29 CFR 
2510.3-21(d)); and
    (3) does not have the authority to engage, retain or discharge any 
person who is, or is proposed to be, a fiduciary regarding any such 
Plan assets.
    (c) Recapture of profits. Section III(a) of this exemption does not 
apply in any case where FACM returns or credits to the Plan all profits 
earned by FACM in connection with the securities transactions 
associated with the covered transaction.
    (d) Special rule for pooled funds. If FACM engages in a covered 
transaction on behalf of an account or fund for the collective 
investment of the assets of more than one Plan (a Pooled Fund):
    (1) Sections III(b), (c), and (d) do not apply if--
    (A) The arrangement under which the covered transaction is 
performed is subject to the prior and continuing authorization, in the 
manner described in this paragraph (d)(1), of a plan fiduciary with 
respect to each Plan whose assets are invested in the Pooled Fund who 
is independent of FACM. The requirement that the authorizing fiduciary 
be independent of FACM shall not apply in the case of a Plan covering 
only employees of FACM, if the requirements of Sections IV(d)(2)(A) and 
(B) are met.
    (B) The authorizing fiduciary is furnished with any reasonably 
available information that FACM believes to be necessary to determine 
whether the authorization should be given or continued, not less than 
30 days prior to implementation of the arrangement or material change 
thereto, including (but not limited to) a description of FACM's 
brokerage placement practices, and, where requested, any reasonably 
available information regarding the matter upon the reasonable request 
of the authorizing fiduciary at any time.
    (C) In the event an authorizing fiduciary submits a notice in 
writing to FACM objecting to the implementation of, material change in, 
or continuation of, the arrangement, the Plan on whose behalf the 
objection was tendered is given the opportunity to terminate its 
investment in the Pooled Fund, without penalty to the Plan, within such 
time as may be necessary to effect the withdrawal in an orderly manner 
that is equitable to all withdrawing Plans and to the non-withdrawing 
Plans. In the case of a Plan that elects to withdraw under this 
subparagraph (d)(1)(C), the withdrawal shall be effected prior to the 
implementation of, or material change in, the arrangement; but an 
existing arrangement need not be discontinued by reason of a Plan 
electing to withdraw.
    (D) In the case of a Plan whose assets are proposed to be invested 
in the Pooled Fund subsequent to the implementation of the arrangement 
and that has not authorized the arrangement in the manner described in 
subparagraphs (d)(1)(B) and (C) of this section, the Plan's investment 
in the Pooled Fund is subject to the prior written authorization of an 
authorizing fiduciary who satisfies the requirements of subparagraph 
(d)(1)(A).
    (2) Section III(a) of this exemption, to the extent that it 
prohibits FACM from being the employer of employees covered by a plan 
investing in a pool managed by FACM, does not apply if--
    (A) FACM is an ``investment manager'' as defined in section 3(38) 
of the Act, and
    (B) Either (i) FACM returns or credits to the Pooled Fund all 
profits earned by FACM in connection with all covered transactions 
engaged in by FACM on behalf of the Pooled Fund, or (ii) the Pooled 
Fund satisfies the requirements of subparagraph (d)(3) of this section.
    (3) A Pooled Fund satisfies the requirements of paragraph (d) of 
this section for a fiscal year of the Fund if--
    (A) On the first day of such fiscal year, and immediately following 
each acquisition of an interest in the Pooled Fund during the fiscal 
year by any Plan covering employees of FACM, the aggregate fair market 
value of the interests in such Fund of all Plans covering employees of 
FACM does not exceed twenty (20) percent of the fair market value of 
the total assets of the Fund; and
    (B) The aggregate brokerage commissions received by FACM, in 
connection with covered transactions engaged in by FACM on behalf of 
all Pooled Funds in which a Plan covering employees of FACM 
participates, do not exceed five (5) percent of the total brokerage 
commissions received by FACM from all sources in such fiscal year.
    Effective Date:This exemption is effective for transactions 
occurring on or after March 13, 2000.
    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 70742.
    Notice to Interested Persons: The applicant was unable to provide 
notice to interested persons of the pendency of the proposed exemption 
within the time period specified in the notice of proposed exemption 
published in the Federal Register on December 17, 1999. However, by 
letter dated February 1, 2000, the applicant represents that a copy of 
the notice of proposed exemption, and a supplemental statement in 
connection therewith as required by the Department's procedures at 29 
CFR 2570.43(b), was delivered by January 25, 2000, to each client of 
FACM which is, or is using the assets of, an ``employee benefit plan'' 
(as defined in section 3(3) of the Act) or a ``plan'' (as defined in 
section 4975(e) of the Code). Interested persons were informed that 
they had until February 28, 2000, to comment or request a hearing on 
the proposed exemption. No written comments or hearing requests were 
received by the Department.

FOR FURTHER INFORMATION CONTACT: Mr. E.F. Williams of the Department, 
telephone (202) 219-8194. (This is not a toll-free number.)

Deutsche Bank AG, et al. (Deutsche Bank), Located in New York, NY

[Prohibited Transaction Exemption 2000-13; Exemption Application No. D-
10384]

Exemption

Section I. Covered Transactions
    The restrictions of section 406(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 (D) of the Code, shall not apply to 
(1) the sale to employee benefit plans (the Plans) of a synthetic 
guaranteed investment contract (the Buy & Hold Synthetic GIC) offered 
by Deutsche Bank, which is or may become a party in interest with 
respect to the Plans; and (2) extensions of credit by Deutsche Bank to 
the Plans for the purpose of funding benefit withdrawals.
    This exemption is conditioned on the requirements set forth below 
in Section II.
Section II. General Conditions
    (a) The decision to enter into a Buy & Hold Synthetic GIC is made 
on behalf of a participating Plan in writing by a fiduciary of such 
Plan which is independent of Deutsche Bank.
    (b) Only Plans with total assets having an aggregate market value 
of at least $50 million are permitted to purchase Buy &

[[Page 13334]]

Hold Synthetic GICs; provided however that--
    (1) In the case of two or more Plans which are maintained by the 
same employer, controlled group of corporations or employee 
organization (i.e., the Related Plans), whose assets are commingled for 
investment purposes in a single master trust or any other entity the 
assets of which are ``plan assets'' under 29 CFR 2510.3-101 (the Plan 
Asset Regulation), which entity has purchased a Buy & Hold Synthetic 
GIC, the foregoing $50 million requirement is deemed satisfied if such 
trust or other entity has aggregate assets which are in excess of $50 
million; provided that, if the fiduciary responsible for making the 
investment decision on behalf of such master trust or other entity is 
not the employer or an affiliate of the employer, such fiduciary has 
total assets under its management and control, exclusive of the $50 
million threshold amount attributable to plan investment in the 
commingled entity, which are in excess of $100 million, or
    (2) In the case of two or more Plans which are not maintained by 
the same employer, controlled group of corporations or employee 
organization (i.e., the Unrelated Plans), whose assets are commingled 
for investment purposes in a group trust or any other form of entity 
the assets of which are ``plan assets'' under the Plan Asset 
Regulation, which entity has purchased a Buy & Hold Synthetic GIC, the 
foregoing $50 million requirement is deemed satisfied if such trust or 
other entity has aggregate assets which are in excess of $50 million 
(excluding the assets of any Plan with respect to which the fiduciary 
responsible for making the investment decision on behalf of such group 
trust or other entity or any member of the controlled group of 
corporations including such fiduciary is the employer maintaining such 
Plan or an employee organization whose members are covered by such 
Plan). However, the fiduciary responsible for making the investment 
decision on behalf of such group trust or other entity--
    (A) Has full investment responsibility with respect to Plan assets 
invested therein; and
    (B) Has total assets under its management and control, exclusive of 
the $50 million threshold amount attributable to Plan investment in the 
commingled entity, which are in excess of $100 million.
    (c) Prior to the execution of a Buy & Hold Synthetic GIC, the 
independent Plan fiduciary receives a full and detailed written 
disclosure of all material features concerning the Buy & Hold Synthetic 
GIC, including--
    (1) A copy of the contract (the Contract), underlying the Buy & 
Hold Synthetic GIC, which has been executed by Deutsche Bank and the 
Plan fiduciary, which stipulates the relevant provisions of such 
instrument, the interest rate that is credited (the Crediting Rate) to 
the book value account (the Book Value Account) of the Buy & Hold 
Synthetic GIC, the applicable fees and the rights and obligations of 
the parties;
    (2) Information explaining in a manner calculated to be understood 
by a Plan fiduciary that if adverse market conditions occur, that the 
Crediting Rate to the Book Value Account of a Buy & Hold Synthetic GIC 
may be as low as 0 percent; and
    (3) Copies of the proposed exemption and grant notice with respect 
to the exemptive relief provided herein.
    (d) Following the receipt of such disclosure, the Plan fiduciary 
approves, in writing, the execution of the Buy & Hold Synthetic GIC on 
behalf of the Plan.
    (e) Upon entering into a Buy & Hold Synthetic GIC with a Plan 
fiduciary of a Plan that provides for participant investment selection, 
Deutsche Bank informs the Plan fiduciary that such fiduciary should 
provide each Plan participant with--
    (1) A summary of the primary provisions of the Contract, including 
the applicable fees; and
    (2) Information explaining that if adverse market conditions occur, 
the Book Value Account's Crediting Rate may be as low as 0 percent.
    (f) Subsequent to a Plan's investment in a Buy & Hold Synthetic 
GIC, the Plan fiduciary and, if applicable, the Plan participant, upon 
such participant's request, receive a monthly report consisting of a 
statement of the Book Value Account, which specifies, among other 
things, the Book Value Account balance for the prior month, withdrawals 
from the Contract, any reduction in the balance of the Book Value 
Account on account of a security in the fixed portfolio (the Fixed 
Portfolio) becoming an impaired security, interest credited to the Book 
Value Account at the Crediting Rate, and the current month's ending 
balance for the Book Value Account. The report will also specify the 
Current Crediting Rate, the prior month's ending fair market value of 
the Fixed Portfolio, the proceeds of any securities liquidated, fees 
charged to the Plan, and the current month's ending fair market value 
of the Fixed Portfolio and rate of return.
    (g) As to each Plan, the combined total of all fees and charges 
imposed under a Buy & Hold Synthetic GIC is not in excess of 
``reasonable compensation'' within the meaning of section 408(b)(2) of 
the Act.
    (h) Each Buy & Hold Synthetic GIC specifically provides an 
objective method for determining the fair market value of the 
securities owned by the Plan pursuant to such GIC.
    (i) Each Buy & Hold Synthetic GIC has a predefined maturity date 
selected by the Plan fiduciary and agreed to by Deutsche Bank.
    (j) Neither Deutsche Bank nor its affiliates maintain custody of 
the assets underlying the Buy & Hold Synthetic GIC or commingle those 
assets with other funds under their management.
    (k) The formulas for computing the Crediting Rate for the Buy & 
Hold Synthetic GIC and a charge for terminating the Buy & Hold 
Synthetic GIC within three years of its effective date (the Early 
Termination Charge) are objectively determined. Further, the Early 
Termination Charge compensates Deutsche Bank for its direct costs 
incurred in connection with the Buy & Hold Synthetic GIC.
    (l) Deutsche Bank maintains books and records of each Buy & Hold 
Synthetic GIC transaction for a period of six years in a manner that is 
accessible for audit and examination. Such books and records are 
subject to annual audit by independent, certified public accountants.
    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 1, 2000 at 65 FR 
4843 as well as a notice of technical correction published on February 
8, 2000 at 65 FR 6228.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady 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

[[Page 13335]]

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 8th day of March, 2000.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 00-6048 Filed 3-10-00; 8:45 am]
BILLING CODE 4510-29-P