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Secretary of Labor Thomas E. Perez
EBSA (Formerly PWBA) Federal Register Notice Prohibited Transaction Exemption 2001-19; Grant of Individual Exemptions; Texas Instruments Employees Pension Plan (the Plan) et al. [06/04/2001]

EBSA (Formerly PWBA) Federal Register Notice

EBSA (Formerly PWBA) Federal Register Notice Prohibited Transaction Exemption 2001-19; Grant of Individual Exemptions; Texas Instruments Employees Pension Plan (the Plan) et al. [06/04/2001]

[PDF Version]

Volume 66, Number 107, Page 30021-30023


DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Exemption Application No. D-10918, et al.]

 
Prohibited Transaction Exemption 2001-19; Grant of Individual 
Exemptions; Texas Instruments Employees Pension Plan (the Plan) et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at the Department in Washington, DC. The notices also 
invited interested persons to submit comments on the requested 
exemptions to the Department. In addition the notices stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicants have represented that they 
have complied with the requirements of the notification to interested 
persons. No public comments and no requests for a hearing, unless 
otherwise stated, were received by the Department.
    The notices of proposed exemption were issued and the exemptions 
are being granted solely by the Department because, effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. 
App. 1 (1996), transferred the authority of the Secretary of the 
Treasury to issue exemptions of the type proposed to the Secretary of 
Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (a) The exemptions are administratively feasible;
    (b) They are in the interests of the plans and their participants 
and beneficiaries; and
    (c) They are protective of the rights of the participants and 
beneficiaries of the plans.

Texas Instruments Employees Pension Plan (the Plan) Located in 
Dallas, Texas

[Prohibited Transaction Exemption No. 2001-19; Application No. D-10918]

Exemption

    The restrictions of sections 406(a), 406(b)(1), 406(b)(2), and 
406(b)(2) of the Act and the sanctions resulting from the application 
of section 4975 of the Code, by reason of section 4975(c)(1) (A) 
through (E) of the Code, shall not apply to the Sale (the Sale) by the 
Plan to Texas Instruments, Inc. (the Employer) of a parcel of improved 
real property (the Property) located in Dallas, Texas. This exemption 
is conditioned upon the adherence to the material facts and 
representations described herein and upon the satisfaction of the 
following requirements:
    (a) All terms and conditions of the Sale are at least as favorable 
to the Plan as those which the Plan could obtain in

[[Page 30022]]

an arm's-length transaction with an unrelated party;
    (b) The Sales price is the greater of $9,400,000 or the fair market 
value of the Property as of the date of the Sale;
    (c) The fair market value of the Property has been determined by an 
independent, qualified appraiser;
    (d) The Sale is a one-time transaction for cash; and
    (e) The Plan does not pay any commissions, costs or other expenses 
in connection with the Sale.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the Notice of Proposed Exemption published on February 15, 2001 at 66 
FR 10527.

Written Comments

    The Department received three comments from interested persons on 
the proposed exemption. The Department forwarded copies of the comments 
to the applicant and requested that the subtrustee (Bank of America) 
respond in writing to the various concerns raised by the commentators. 
A description of the comments and the Bank of America's responses are 
summarized below.
    One commentator urged that the exemption not be granted because he 
believed that the Property had a better chance of appreciation than the 
cash equivalent and that the increase in value was not a fair 
appraisal.
    Bank of America, in response represents the following: It has 
determined that the Sale of the Property to the Employer is prudent 
under ERISA and is in the best interest of the Plan participants and 
beneficiaries based, in part, on its determination that market values 
for comparable properties in the Dallas, Texas area continue to be at a 
record high and that the current real estate market presents a 
favorable selling opportunity to the Plan. Although currently selling 
at record highs, real estate values can decline for a number of 
reasons, such as downturns in the economy, environmental contamination, 
functional obsolescence, and changes in use and/or the growth patterns 
surrounding a property's location. The improvements, constructed in 
1981, are now approximately 20 years old and have a remaining economic 
life of 27 years. The building is well maintained; however, the 
structure is aging and at some point it may be less attractive in the 
market place from the standpoint of physical plant and functionality. 
The commentator's objection to only a 50% increase in value over the 22 
years of the lease does not recognize the actual yield that has been 
produced by the annual rental income in addition to the sales price 
proceeds.
    Two commentators took issue with the selection of the appraiser for 
the Property, and the subsequent evaluation, specifically requesting 
multiple appraisals and questioning whether the appraiser specialized 
in commercial real estate. Bank of America notes that as the subtrustee 
of the Plan, Bank of America has the responsibility to make the good 
faith fiduciary determination that the amount received by the Plan upon 
the Sale is no less than adequate consideration, as defined in ERISA 
Sec. 3(18). In making the good faith determination that the Plan will 
receive adequate consideration, Bank of America, as a fiduciary, has 
relied on the appraisal report of the independent appraiser, which will 
be updated at the closing date, to insure that the amount received is 
no less than the then fair market value. Furthermore, Bank of America 
represents the Property has been appraised by an independent appraiser, 
the Pyles Whatley Corporation, a respected commercial real estate 
appraisal firm. It has a national appraisal practice and has appraised 
properties of large industrial sites in more than 25 states in 1999 and 
2000. The appointment of the appraiser was made properly by Bank of 
America rather than other Plan fiduciaries since the appraisal report 
will be used by Bank of America in complying with its fiduciary 
responsibility with respect to the Sale.
    The appraisal follows standard methodologies including the use of 
values of comparable properties. Bank of America has carefully reviewed 
the appraisal and other information that it has available to it and 
believes that the appraisal correctly determines the fair market value 
of the Property. In making this good faith fiduciary determination to 
sell the Property at this value, after having made a prudent review of 
the valuation report and the relevant circumstances at the time of the 
valuation report, Bank of America does not believe that there is any 
reason to require multiple appraisals to reach a valuation for the 
Property.
    Accordingly, after giving full consideration to the entire record, 
including the comments by the commentators, and the responses of the 
applicant, the Department has determined to grant the exemption as 
proposed. In this regard, the comments submitted to the Department have 
been included as part of the public record of the exemption 
application. The complete application file, including all supplemental 
submissions received by the Department, is made available for public 
inspection in the Public Documents Room of the Pension and Welfare 
Benefits Administration, Room N-1513, U.S. Department of Labor, 200 
Constitution Ave. NW, Washington DC 20210.

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

THS Profit Sharing Plan (the Plan) Located in Bedford Hills, New 
York

[Prohibited Transaction Exemption No. 2001-20; Application No. D-10921]

Exemption

    The sanctions resulting from the application of section 4975 of the 
Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall 
not apply to the sale (the Sale) by the Plan of two life insurance 
policies (the Policies) which insure Tim H. Shoecraft, the sole 
participant (the Participant),\1\ to the Shoecraft Family Trust dated 
October 9, 1991 (the Trust), which is a disqualified party with respect 
to the Plan under section 4975(e)(2) of the Code, provided that the 
following conditions are met:
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    \1\ Because Tim H. Shoecraft is the sole shareholder of 
Shoecraft and Associates and he is the only participant in the Plan, 
there is no jurisdiction under Title I of the Employee Retirement 
Income Security Act of 1974 (the Act) pursuant to 29 CFR 2510.3-
3(b). However, there is jurisdiction under Title II of the Act 
pursuant to section 4975 of the Code.
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    (a) The Participant is the insured under the contract;
    (b) Prior to the Sale, the Plan will afford the insured notice of 
the Sale and the opportunity to purchase the Policies;
    (c) The Sale will be for full and adequate consideration, based 
upon the cash surrender value of the Policies at the time of the 
transaction;
    (d) The Plan is authorized to purchase and own life insurance;
    (e) The amount received by the Plan as consideration for the Sale 
is at least equal to the amount necessary to put the Plan in the same 
cash position as it would have been in had it retained the contract, 
surrendered it, and made any distribution owing to the Participant of 
his vested interest under the Plan; and
    (f) The Plan is not required to pay any commissions, costs or other 
expenses in connection with the Sale.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the Notice of Proposed Exemption published on April 16, 2001 at 66 FR 
19533.

FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department,

[[Page 30023]]

telephone (202) 219-8883 (this is not a toll-free number).

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the exemptions does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) These exemptions are supplemental to and not in derogation of, 
any other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the transaction is in fact a 
prohibited transaction; and
    (3) The availability of these exemptions is subject to the express 
condition that the material facts and representations contained in each 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 30th day of May, 2001.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 01-13906 Filed 6-1-01; 8:45am]
BILLING CODE 4510-29-P