Grant of Individual Exemptions; Derrerred Profit Sharing Plan of
the Penske Corporation (the Plan) et al. [Notices] [09/27/2001]
Grant of Individual Exemptions; Derrerred Profit Sharing Plan of
the Penske Corporation (the Plan) et al. [09/27/2001]
Volume 66, Number 188, Page 49418-49424
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 2001-34; Exemption Application No. D-
10911, et al.]
Grant of Individual Exemptions; Derrerred Profit Sharing Plan of
the Penske Corporation (the Plan) et al.
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Grant of individual exemptions.
-----------------------------------------------------------------------
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.
Deferred Profit Sharing Plan of the Penske Corporation (the Plan)
Located in Charlotte, North Carolina
[Prohibited Transaction Exemption No. 2001-34; Exemption Application
No. D-10911]
Exemption
The restrictions of sections 406(a) and 406(b)(1) and (b)(2) and
section 407(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 (E) of the Code, shall not apply, (1) effective
June 15, 2000, to the acquisition and holding by the Plan of interests
(the Interests) in the Penske Company, LLC (the LLC), a wholly owned
subsidiary of the Plan sponsor, the Penske Corporation (Penske), which
were distributed (the Distribution) as dividends to the Plan as a
shareholder of Penske common stock (Penske Stock); and (2) the proposed
redemption, by the LLC, of the Interests held by the Plan for the
greater of $3.37 per-unit or their fair market value at the date of the
redemption, provided that the following conditions were or will be met:
(a) The Interests were acquired by the Plan pursuant to Plan
provisions for individually-directed investment of participant
accounts;
[[Page 49419]]
(b) The Plan's receipt and holding of the Interests occurred in
connection with the Distribution;
(c) The Plan's acquisition of the Interests as a dividend paid to
all holders of Penske Stock resulted from an independent act of Penske
as a corporate entity, such that all holders of the Penske Stock,
including the Plan, were treated in the same manner;
(d) Within 15 business days after the date the notice granting the
final exemption is published in the Federal Register, the LLC will
redeem the Interests held by the Plan for not less than $3.37 per unit;
(e) The price received by the Plan for the Interests is not less
than the fair market value of the Interests on the date that the
redemption occurs; and
(f) The Plan paid no fees or commissions in connection with the
acquisition and holding of the Interests nor will it pay any fees or
commissions in connection with the redemption of the Interests.
EFFECTIVE DATE: This exemption is effective as of June 15, 2000 with
respect to the acquisition and holding by the Plan of the Interests. In
addition, this exemption is effective as of the date the final
exemption is granted with respect to the LLC's redemption of the
Interests held by the Plan.
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) published on July 10,
2001 at 66 FR 36002.
Written Comments
The only written comments received by the Department were submitted
by the applicant, Penske. These comments sought several changes to the
Notice, each of which is discussed below.
In Representation 1 of the Summary of Facts and Representations
(the Summary), the applicant requests that the first two sentences of
the second paragraph be revised to read as follows for technical
accuracy:
As of December 31, 2000, the Plan had a total of 1,174
participants. The Plan had assets, as of March 31, 2000, with an
approximate aggregate fair market value of $35,477,000. Also as of
March 31, 2000, 49.8% (or $17,674,629) of the fair market value of
the total assets of the Plan was invested in Penske Stock.
In addition, the applicant requests that the phrase ``qualifying
employer security'' as used in footnote 2 of the Summary be revised to
read ``employer security''. Further, in Representation 5 of the
Summary, the applicant represents that the word ``Code'' in the next to
the last line of the first paragraph should be revised to the word
``Act''. The Department concurs in these changes submitted by the
applicant.
Finally, the applicant requests that Representation 11(a) of the
Notice and its corresponding condition (a) be revised to read as
follows: ``The Interests were acquired by the Plan as the result of a
dividend paid to all holders of Penske Stock'' to remove any
implication that the Plan participants directed their accounts to
invest in the Interests. In response to this comment, the Department
notes the suggested modification to Representation 11(a) but has
determined to leave the language in condition (a) unchanged and to
modify condition (c) to read as the follows: ``The Plan's acquisition
of the Interests as a dividend paid to all holders of Penske Stock
resulted from an independent act of Penske as a corporate entity, such
that all holders of the Penske Stock, including the Plan, were treated
in the same manner''.
Accordingly, after giving full consideration to the entire record,
including the comments by the applicant, the Department has determined
to grant the exemption as modified. 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 Disclosure Room of
the Pension and Welfare Benefits Administration, Room N-1513, U.S.
Department of Labor, 200 Constitution Avenue. NW, Washington, D.C.
20210.
FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department,
telephone (202) 219-8883. (This is not a toll-free number.)
Riggs Bank N.A., Located in Washington, DC
[Prohibited Transaction Exemption 2001-35; Exemption Application No. D-
10928]
Exemption
Section I--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:
(a) the extension of credit (the Advance or Advances) by Riggs Bank
N.A. (Riggs) to a participant-directed individual account plan (Plan);
and (b) the Plan's repayment of an Advance or Advances, plus accrued
interest.
Section II--Conditions
The relief provided under Section I is available only if the
following conditions are met:
(a) Each Advance is made in connection with the administration of a
portion of the Plan's assets by Riggs as a unitized fund (Unitized
Fund) in order to facilitate redemptions from the Unitized Fund.
(b) Each Advance is made in accordance with the terms of a written
agreement (the Agreement) that describes terms and procedures for the
Advances, including standing instructions addressing the initiation,
amount, repayment and formula or method for determining the interest
rate payable with respect to each Advance and is approved in writing by
a fiduciary of the Plan who is independent of and not an affiliate of
Riggs (Independent Plan Fiduciary).
(c) Interest payable by the Plan on each Advance is determined in
accordance with an objective formula or method described in the
Agreement.
(d) The Plan repays each Advance and accrued interest in accordance
with the terms of the Agreement within ten (10) business days after the
initiation of the Advance.
(e) Each Advance is unsecured.
(f) The aggregate amount advanced on any business day that an
Advance is initiated does not, after the Advance is made, exceed 25% of
the total market value of the Unitized Fund.
(g) On the date that an Advance is initiated, Riggs provides the
Independent Plan Fiduciary with notice of the amount of the Advance and
the actual interest rate to be applied.
(h) Within ten (10) days after an Advance is fully repaid, Riggs
provides the Independent Plan Fiduciary with a confirmation statement
which includes the date of repayment, the amount of the Advance, the
actual interest rate applied, and the total amount of interest paid by
the Plan.
(i) The Agreement may be terminated by the Independent Plan
Fiduciary at any time, subject to the Plan's repayment of any
outstanding Advances.
(j) The Advances are made on terms at least as favorable to the
Plan as those the Plan could obtain in an arm's-length transaction with
an unrelated party.
(k) Neither Riggs nor its affiliate has or exercises any
discretionary authority or control with respect to the initiation of an
Advance, the amount of an Advance, the interest rate payable on an
Advance, or the repayment of the Advance.
(l) The fair market value of the assets in the Unitized Fund is
determined by
[[Page 49420]]
an objective method specified in the Agreement. In the case of employer
stock, such stock must be stock for which market quotations are readily
available from independent sources.
(m) Riggs or its affiliate is not (i) a trustee of the Plan (other
than a nondiscretionary trustee who does not render investment advice
with respect to the assets of the Unitized Fund), (ii) a plan
administrator (within the meaning of section 3(16)(A) of the Act and
Code section 414(g)), (iii) a fiduciary who is expressly authorized in
writing to manage, acquire or dispose of on a discretionary basis any
assets of the Unitized Fund, or (iv) an employer any of whose employees
are covered by the Plan.
(n) (a) Riggs will maintain or cause to be maintained for a period
of six years from the date of the granting of the exemption the records
necessary to enable the persons described in paragraph (b) to determine
whether the conditions of this exemption have been met, except that:
(1) A prohibited transaction will not be considered to have
occurred if, due to circumstances beyond the control of Riggs, the
records are lost or destroyed prior to the end of the six-year period;
and
(2) No party in interest, other than Riggs, shall be subject to the
civil penalty that may be assessed under section 502(i) of the Act, or
to the taxes imposed by section 4975(a) and (b) of the Code, if the
records are not maintained, or are not available for examination as
required by paragraph (b); and
(b)(1) Except as provided in paragraph (b)(2) and notwithstanding
any provisions of subsections (a)(2) and (b) of section 504 of the Act,
the records referred to in paragraph (a) are unconditionally available
at their customary location for examination during normal business
hours by: (A) Any duly authorized employee or representative of the
Department or the Internal Revenue Service; (B) Any fiduciary of the
Plan, or any duly authorized employee or representative of such
fiduciary; and (C) Any participant or beneficiary of the Plan or duly
authorized representative of such participant or beneficiary.
(2) None of the persons described in paragraph (b)(1)(B) and
(b)(1)(C) shall be authorized to examine trade secrets of Riggs or
commercial or financial information which is privileged or
confidential.
Section III--Definitions
(a) The term ``affiliate'' means (i) any person directly or
indirectly, through one or more intermediaries, controlling, controlled
by, or under common control with such other person; (ii) any officer,
director, or partner, employee or relative (as defined in section 3(15)
of the Act) of such other person; and (iii) any corporation or
partnership of which such other person is an officer, director or
partner.
(b) The term ``control'' means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.
EFFECTIVE DATE: The exemption is effective as of September 11, 2000.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the proposed exemption published on July 30, 2001, at 66 FR 39351.
FOR FURTHER INFORMATION CONTACT: Karen Lloyd of the Department,
telephone (202) 219-8194. (This is not a toll-free number).
Principal Mutual Holding Company (PMHC), Located in Des Moines,
IA
[Prohibited Transaction Exemption 2001-36; Exemption Application No. D-
10940]
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 receipt of shares of common stock (Common Stock) issued by
Principal Financial Group, Inc. (PFG), the successor entity to PMHC,\1\
or (2) the receipt of cash (Cash) or policy credits (Policy Credits) by
any eligible policyholder (the Eligible Policyholder) of Principal Life
Insurance Company (Principal), a subsidiary of PMHC, which is an
employee benefit plan (the Plan), including a Plan sponsored by
Principal and its affiliates (the Principal Plan), in exchange for such
Eligible Policyholder's mutual membership interest in PMHC, pursuant to
a plan of conversion (the Plan of Conversion) adopted by PMHC and
implemented in accordance with Iowa Insurance Law.
---------------------------------------------------------------------------
\1\ For purposes of this exemption, references to PMHC will
generally include references to PFG unless noted, or unless the
context requires otherwise.
---------------------------------------------------------------------------
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 Principal Plan, of Common Stock, whose fair market value
exceeds 10 percent of the value of the total assets held by such Plan.
This exemption is subject to the general conditions set forth below
in Section II.
Section II. General Conditions
(a) The Plan of Conversion is implemented in accordance with
procedural and substantive safeguards that are imposed under Iowa
Insurance Law and is subject to review and approval by the Iowa
Commissioner of Insurance (the Commissioner).
(b) The Commissioner reviews the terms of the options that are
provided to Eligible Policyholders of PMHC as part of such
Commissioner's review of the Plan of Conversion, and only approves the
Plan following a determination that such Plan is fair and equitable to
all Eligible Policyholders. The New York Superintendent of Insurance
(the Superintendent) may object to the Plan of Conversion if he or she
finds that such Plan of Conversion is not fair and equitable to New
York policyholders.
(c) As part of their separate determinations, both the Commissioner
and the Superintendent concur on the terms of the Plan of Conversion.
(d) Each Eligible Policyholder has an opportunity to vote at a
special meeting to approve the Plan of Conversion after receiving full
written disclosure from PMHC and/or Principal.
(e) One or more independent fiduciaries of a Plan that is an
Eligible Policyholder elects to receive Common Stock, Cash or Policy
Credits pursuant to the terms of the Plan of Conversion and neither
PMHC 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.
(f) If Policy Credits are elected by a Plan policyholder holding a
group annuity contract, the policyholder may elect to have the policy
value increased by the amount of compensation allocated or to have the
policy enhanced with an interest in a separate account (the Separate
Account), which is maintained by Principal.
(1) If no election is made by a Plan policyholder, the ``default''
consideration for the policyholder is Policy Credits (in the form of an
interest in the Separate Account), unless the contract or regulatory
concerns preclude this form of compensation.
(2) Where applicable, Principal allocates the Policy Credit
compensation received, on a pro rata basis, among the participants of
the Plan
[[Page 49421]]
that is invested in the Separate Account, in accordance with their
account balances, unless the policyholder directs otherwise, and
neither PMHC nor its affiliates provides investment advice or
recommendations to the policyholder on which option to choose or with
respect to the default consideration, in the event no choice is made.
(3) No purchases or sales of assets are made between Principal or
its affiliates and the Separate Account.
(4) Upon receiving a notice of withdrawal from a Plan policyholder,
Northern Trust Company (NTC), the custodian for shares of Common Stock
that are held in the Separate Account, may sell such shares of Common
Stock on the open market at fair market value.
(5) The shares of Common Stock held in the Separate Account are
voted in accordance with the procedures contained in Section 8.9 of the
Plan of Conversion.
(g) In the case of a Principal Plan, U.S. Trust, N.A., the
independent fiduciary appointed to represent the Principal Plans,
(1) Votes on whether to approve or not to approve the proposed
demutualization;
(2) Elects between consideration in the form of Common Stock, Cash
or Policy Credits on behalf of such Plans;
(3) Determines how to apply the Common Stock, Cash or Policy
Credits received for the benefit of the participants and beneficiaries
of the Principal Plans;
(4) Votes on shares of Common Stock that are held by the Principal
Plans and disposes of such stock held by a Plan exceeding the
limitation of section 407(a)(2) of the Act as soon as it is reasonably
practicable, but in no event later than six months after the Effective
Date of the Plan of Conversion;
(5) Provides the Department with a complete and detailed final
report as it relates to the Principal Plans prior to the Effective Date
of the demutualization; and
(6) Takes all actions that are necessary and appropriate to
safeguard the interests of the Principal Plans and their participants
and beneficiaries.
(h) Each Eligible Policyholder entitled to receive Common Stock is
allocated at least 100 shares and additional consideration is allocated
to Eligible Policyholders based on actuarial formulas that take into
account each policy's contribution to the surplus of Principal, which
formulas have been reviewed by the Commissioner.
(i) All Eligible Policyholders that are Plans participate in the
demutualization on the same basis and within their class groupings as
other Eligible Policyholders that are not Plans.
(j) No Eligible Policyholder pays any brokerage commissions or fees
in connection with the receipt of the demutualization consideration.
(k) All of Principal's policyholder obligations remain in force and
are not affected by the Plan of Conversion.
(l) The terms of the transactions are at least as favorable to the
Plans as an arm's length transaction with an unrelated party.
Section III. Definitions
For purposes of this exemption:
(a) The term ``PMHC'' means Principal Mutual Holding Company, its
successor in interest, Principal Financial Group, Inc. and any of their
affiliates as defined in paragraph (b) of this Section III, unless
noted, or unless the context requires otherwise.
(b) An ``affiliate'' of PMHC includes--
(1) Any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control
with PMHC (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 ``Effective Date'' refers to the date on which the closing
of the initial public offering (the IPO) occurs, which will be a date
occurring after the approval of the Plan of Conversion by voting
policyholders and the Commissioner, provided that in no event will the
Effective Date be more than 12 months after the date on which the
Commissioner has approved or has conditionally approved the Plan of
Conversion, unless such period is extended by the Commissioner. The
Plan of Conversion will be deemed to become effective at 12:01 a.m.,
Central Time, on the Effective Date.
(d) The term ``Record Date'' means the date that is one year prior
to the Adoption Date.
(e) The ``Adoption Date'' refers to the date that PMHC's Board of
Directors adopted the Plan of Conversion. This date was March 31, 2001.
(f) The term ``Eligible Policyholder'' means a person who, on the
Record Date, is the owner of one or more policies and who, as reflected
in PMHC's or Principal's records, has a continuous membership interest
in PMHC through ownership of one or more policies from the Record Date
until and on the Effective Date. Members of PMHC who were issued
policies on or before April 8, 1980 and transferred ownership rights of
such policies on or before April 8, 1980 are Eligible Policyholders so
long as such policies remain in force through the Effective Date.
(g) The term ``Policy Credit'' means consideration to be paid in
the form of an increase in cash value, account value, dividend
accumulations, face amount, extended term period or benefit payment, as
appropriate, depending upon the policy. If the policy is owned by a
qualified plan customer (the Qualified Plan Customer) [i.e., an owner
of a group annuity contract issued by Principal, which contract is
designed to fund benefits under a retirement plan which is qualified
under section 401(a) and section 403(a) of the Code (including a plan
covering employees described in section 401(c) of the Code, provided
such plan meets the requirements of Rule 180 promulgated under the
Securities Exchange Act of 1933, as amended) or which is a governmental
plan described in section 414(d) of the Code, excluding (1) group
annuity contracts that fund only guaranteed deferred annuities or
annuities in the course of payments and (2) group annuity contracts for
which Principal does not perform retirement plan recordkeeping services
and whose group annuity contracts do not provide for investments in
Principal's pooled unregistered separate accounts], the Policy Credit
may take the form of a Separate Account Policy Credit or an Account
Value Policy Credit. If the policy is owned by a Non-Rule 180 Qualified
Plan Customer, the Policy Credit will take the form of an Account Value
Policy Credit.
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 August 3, 2001 at 66 FR
40736.
Written Comments
The Department received five written comments with respect to the
proposed exemption. Four comments were submitted by Plan policyholders
of Principal while the fifth comment was submitted by PMHC. Of the
policyholder comments received, three expressed opposition to the
exemption for various reasons and were forwarded to PMHC for response.
The fourth policyholder comment raised issues that were not relevant to
PMHC's demutualization so it was not forwarded to PMHC for response.
PMHC's comment letter expressed concerns in a number of areas. PMHC
also requested that the Department make certain changes to the proposed
[[Page 49422]]
exemption and the Summary of Facts and Representations.
Following is a discussion of the comments received.
Plan Policyholder Comments
The first commenter states that he is opposed to PMHC's
demutualization because he believes money invested in a Plan should be
taken after the participant reaches retirement age and any dividends
received thereunder should be reinvested in the Plan. Otherwise, the
commenter explains that he would look for a different type of company
in order to purchase stock.
The second commenter indicates that he is opposed to the
demutualization because it will expose the insurer to the ``abuse of
stock options.'' The commenter also notes that there are ``millions of
pensions (i.e., plans) relying on Principal'' which will be adversely
affected by such abuse.
The third commenter states that he is generally opposed to the
demutualization process because he believes it will allow an insurer to
``play the mergers and acquisitions game'' to the detriment of
policyholders but to the benefit of the insurer's officers and
directors. The commenter also explains that he cannot help but think
that the prohibited transaction provisions of the Act from which PMHC
has requested exemptive relief will protect the American public from
the activities of such officers and directors.
PMHC states that it has reviewed the aforementioned comments and
has concluded that the issues raised therein are not germane to the
requested exemption but merely reflect the commenters' opposition to
the demutualization transaction. Therefore, PMHC has declined to
respond specifically to each of the comment letters. In PMHC's view,
the comment letters do not request additional information but instead
express the opinions of the commenters. However, PMHC observes that the
commenters had a sufficient opportunity to express their opposition to
the demutualization at the public hearing held on July 25, 2001. On
July 24, 2001, PMHC explains that approximately 92 percent of the
Principal policyholders who voted, voted to approve the Plan of
Conversion.
PMHC's Comment
In its comment letter, PMHC has attempted to clarify the proposed
exemption and the Summary of Facts and Representations in the following
areas of specific concern:
1. Superintendent's Findings. In pertinent part, Section II(b) of
the proposed exemption states that the Superintendent may object to the
Plan of Conversion if he or she finds that such Plan of Conversion is
``not fair or equitable to all Eligible Policyholders.'' For purposes
of clarification, PMHC states that the last sentence of this paragraph
should end with the phrase ``not fair or equitable to New York
policyholders.'' Accordingly, the Department has made the requested
change in the final exemption.
2. Allocation of Policy Credits by Principal. Section II(f)(2) of
the proposed exemption states that Principal will allocate Policy
Credit compensation received on a pro rata basis, among the
participants of the Plan that is invested in the Separate Account, in
accordance with their account balances, unless the policyholder directs
otherwise and that neither PMHC nor its affiliates will provide
investment advice or recommendations to the policyholder on which
option to choose or with respect to the default consideration, in the
event no choice is made. PMHC states that this paragraph should begin
with the words ``Where applicable'' to reflect the fact that Principal
only allocates with respect to those defined contribution plan
customers for whom Principal is the recordkeeper.
In response to this comment, the Department has made the requested
change in the final exemption.
3. Sale of Common Stock Held by the Separate Account. Section
II(f)(4) of the proposed exemption states that upon receiving a notice
of withdrawal from a Plan policyholder, NTC, the custodian for shares
of Common Stock that are held in the Separate Account will sell such
shares on the open market at fair market value. PMHC explains that the
word ``sells'' should be replaced with the words ``may sell'' because
there will be a small percentage of liquid assets held in the Separate
Account in addition to the Common Stock. If a withdrawal request can be
accommodated by using the liquid assets, PMHC further explains that a
sale may not be necessary. In all cases, PMHC notes that distributions
will be based on the fair market value of the Common Stock, and no
sales or purchases will be made to or from PMHC.
In response to this comment, the Department has made the requested
change in the final exemption.
4. Separate Account Voting Process. Section II(f)(5) of the
proposed exemption describes, in part, the voting to be utilized for
the Separate Account. PMHC states that the mechanics of the voting
process would be clearer if section II(f)(5) were revised to read as
follows:
(5) The shares of Common Stock held in the Separate Account are
voted in accordance with the procedures contained in Section 8.9 of the
Plan of Conversion.
The Department does not object to PMHC's revisions to this comment
and has made the requested modification. The Department, however, notes
that Section 8.9 of the Plan of Conversion, emphasizes the roles to be
undertaken by Principal, its agent or Northern Trust Investments, Inc.
(NTI), the independent trustee for the Separate Account in voting
shares of Common Stock that are held in the Separate Account.
Specifically, Section 8.9 of the Plan of Reorganization currently
requires that Principal or its agent obtain specific instruction from a
Qualified Plan Customer as to how such Qualified Plan Customer wishes
to vote shares of Common Stock representing such Qualified Plan
Customer's interest in the Separate Account. If specific instruction is
not given to Principal or its agent by the Qualified Plan Customer,
Principal (or, if applicable, its agent) will vote on routine matters
(e.g., the appointment of accountants), shares of Common Stock held in
the Separate Account representing the interest of the Qualified Plan
Customer, in the same ratio as those shares of Common Stock that are
held in the Separate Account for which instructions have been given by
Qualified Plan Customers.
In the event of a shareholder vote on a non-routine matter (e.g.,
proxies), Section 8.9 of the Plan of Conversion provides that shares of
Common Stock held in the Separate Account will be voted in accordance
with instructions provided by NTI. In this regard, NTI will instruct
Principal or its agent that shares of Common Stock should be voted in a
way that, in NTI's judgment, is in the best interest of the
participants and beneficiaries of the Plans of Qualified Plan Customers
in whose interest such Common Stock is held. In performing its
fiduciary duties, as independent trustee of the Separate Account, NTI
will act solely in the interest of the participants and beneficiaries
of the Plans that have invested directly or indirectly in the Separate
Account in accordance with section 404 of the Act and the provisions of
Part 4 of Title I of the Act, and pursuant to an investment policy that
seeks to maximize the long-term investment returns of the Separate
Account.
5. Common Stock Allocation. Section II(h) of the proposed exemption
states that each Eligible Policyholder entitled
[[Page 49423]]
to receive Common Stock will be allocated at least 100 shares and that
additional consideration will be allocated to such Eligible
Policyholders who own participating policies based on actuarial
formulas that take into account each participating policy's
contribution to the surplus of Principal. In the first sentence of
Section II(h), PMHC requests that the phrases, ``who own participating
policies'' and the word, ``participating'' in the next line be deleted.
The Department has made the suggested revisions in the grant notice.
6. Eligible Policyholder Definition. Section III(f) of the proposed
exemption defines the term ``Eligible Policyholder.'' The last sentence
of Section III(f) states that ``Members of PMHC who were issued
policies before April 8, 1980 and transferred ownership rights of such
policies on or before April 8, 1980 are Eligible Policyholders so long
as such policies remain in force on the Record Date.'' For purposes of
clarification, PMHC suggests that this sentence be revised to read as
follows: ``Members of PMHC who were issued policies on or before April
8, 1980 and transferred ownership rights of such policies on or before
April 8, 1980 are Eligible Policyholders so long as such policies
remain in force through the Effective Date.''
In response to this comment, the Department has made the requested
change in the final exemption.
7. PMHC's Restructuring Process. Representation 6 of the Summary of
Facts and Representations describes PMHC's restructuring process. To
reflect the steps that are entailed in its demutualization, PMHC
suggests that the second, third and fourth sentences of Representation
6 be replaced with the following text:
Currently, PMHC owns Principal Financial Group, Inc., an Iowa
business corporation (PFG Iowa), which owns all of the stock of
Principal Financial Services, Inc., an Iowa business corporation,
which, in turn, owns all of the stock of Principal. PMHC also
currently owns Principal Financial Group, Inc. (PFG), a Delaware
corporation, which owns all of the stock of Principal Iowa Newco,
Inc. (PIN), an Iowa business corporation. PFG is a holding company
the shares of which will be distributed to Eligible Policyholders
and listed on the New York Stock Exchange. After PMHC is converted
into a stock company, it will be merged with and into PIN. PFG Iowa
will then merge with and into PIN. Principal Financial Services,
Inc., will then merge with and into PIN and PIN will change its name
to Principal Financial Services, Inc.
The Department notes the aforementioned revisions to Representation 6.
8. Sale of Common Stock/Voting Process. Representation 13 of the
Summary of Facts and Representations restates the provisions of
Sections II(f)(4) and (5) of the proposed exemption. As noted above,
these conditions relate to the sale of Common Stock in the Separate
Account by NTC, the custodian, and the voting procedures that are
currently established for the Separate Account. In referring to its two
previous comments, PMHC states that a request for a withdrawal from the
Separate Account may not require a sale of Common Stock if the
withdrawal can be accommodated using available liquid assets held by
the Separate Account. Also, PMHC points out that the fifth paragraph in
Representation 13, attributes some mechanical tasks regarding the
voting of shares of Common Stock to NTI, whereas such tasks should be
attributed to Principal or its agent under Section 8.9 of the Plan of
Conversion, as explained above. PMHC asserts that Principal or its
agent will cause the undirected shares to be voted under the ``mirror
voting'' procedure and it states that such action will not involve any
discretionary act on the part of Principal.
In response to this comment, the Department notes these
clarifications made by PMHC.
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-10940) 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 Disclosure Room of
the Pension and Welfare Benefits Administration, Room N-1513, U.S.
Department of Labor, 200 Constitution Avenue, NW., Washington, DC
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.)
Miller International, Inc. Profit Sharing Plan (the Plan), Located
in Denver, Colorado
[Prohibited Transaction Exemption 2001-37; Exemption Application No. D-
10980]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the
Act and the sanctions resulting from the application of section 4975 of
the Code, by reason of section 4975(c)(1)(A) through (E) of the Code,
shall not apply to the sale of a certain three-acre parcel of vacant
land (the Property) by the Plan to Miller International, Inc., the
sponsor of the Plan and a party in interest with respect to the Plan;
provided that the following conditions are satisfied:
(a) The sale is a one-time cash transaction;
(b) The Plan receives the current fair market value for the
Property, as established by an independent qualified appraiser at the
time of the sale; and
(c) The Plan pays no commissions or other expenses associated 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 July 30, 2001 at 66 FR
39371.
FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department
at (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
[[Page 49424]]
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 24th day of September, 2001.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor
[FR Doc. 01-24150 Filed 9-26-01; 8:45 am]
BILLING CODE 4510-29-P
|
