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Secretary of Labor Thomas E. Perez

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemption To Amend and Replace Prohibited Transaction Exemption (PTE) 85-131, Involving the Watkins Master Trust (the Trust), Located in Atlanta, GA [08/22/2002]

[PDF Version]

Volume 67, Number 163, Page 54484-54486

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2002-39; Exemption Application No. D-
11036]

 
Grant of Individual Exemption To Amend and Replace Prohibited 
Transaction Exemption (PTE) 85-131, Involving the Watkins Master Trust 
(the Trust), Located in Atlanta, GA

AGENCY: Pension and Welfare Benefits Administration, U.S. Department of 
Labor.

ACTION: Grant of individual exemption to modify and replace PTE 85-131.

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SUMMARY: This document contains a final exemption before the Department 
of Labor (the Department) that amends and replaces PTE 85-131 (50 FR 
32333, August 9, 1985). PTE 85-131 is an individual exemption providing 
relief, since March 29, 1985, for (1) the leasing of certain improved 
real property by the Trust to Watkins Associated Industries, Inc. 
(Watkins), a party in interest with respect to the plans (the Plans) 
participating in the Trust under the terms of a written lease (the New 
Lease); and (2) the possible cash purchase of the Trust's interest in 
the property by Watkins.
    The final exemption modifies an option to purchase provision in the 
New Lease by allowing Watkins to acquire the Trust's leasehold 
interests in a building, the improvements constructed thereon, and in a 
ground lease on May 8, 2002, instead of at the end of New Lease renewal 
term on December 31, 2008. In addition, the exemption replaces PTE 85-
131, which expired by operation of law upon the consummation of the 
sale. The exemption affects participants and beneficiaries of, and 
fiduciaries with respect to the Trust.

EFFECTIVE DATE: This exemption is effective as of May 8, 2002.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady, Office of Exemption 
Determinations, Pension and Welfare Benefits Administration, U.S. 
Department of Labor, telephone (202) 693-8556. (This is not a toll-free 
number.)

SUPPLEMENTARY INFORMATION: On June 18, 2002, the Department published a 
notice of proposed exemption in the Federal Register at 67 FR 41517 
that would amend and replace PTE 85-131. PTE 85-131 provides an 
exemption from certain prohibited transaction restrictions of section 
406 of the Employee Retirement Income Security Act of 1974 (the Act) 
and from the sanctions resulting from the application of section 4975 
of the Internal Revenue Code of 1986 (the Code), as amended, by reason 
of section 4975(c)(1) of the Code.
    The proposed exemption was requested in an application filed on 
behalf of the Trust and Watkins,\*\ pursuant to section 408(a) of the 
Act and section 4975(c)(2) of the Code, and in accordance with the 
procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 
August 10, 1990). Effective December 31, 1978, section 102 of 
Reorganization Plan No. 4 of 1978 (43 FR 47713, October 17, 1978) 
transferred the authority of the Secretary of the Treasury to issue 
exemptions of the type

[[Page 54485]]

requested to the Secretary of Labor. Accordingly, this exemption is 
being issued solely by the Department.
    The proposed exemption gave interested persons an opportunity to 
comment and to request a hearing. In this regard, all interested 
persons were invited to submit written comments or requests for a 
hearing on the pending exemption on or before August 2, 2002. All 
comments were to be made a part of the record.
    During the comment period, the Department received one written 
comment from a participant in the Watkins Associated Industries, Inc. 
Profit Sharing Plan, who objected to the exemption and requested that 
no changes be made to his individual account in this Plan. The 
Department received no requests for a public hearing.
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    \*\ The Department also has under consideration a similar 
exemption request (D-11038) that was filed on behalf of Wilwat 
Properties, Inc., a party in interest with respect to the Plans 
participation in the Trust.
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    For further information regarding the comment or other matters 
discussed herein, interested persons are encouraged to obtain copies of 
the exemption application file (Exemption Application No. D-11036) 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, D.C. 
20210.
    Accordingly, after giving full consideration to the entire record, 
including the written comment received, the Department has decided to 
grant the exemption.

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 section 4975(c)(2) of the Code does 
not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions of the Act and Code, including any 
prohibited transaction provisions to which the exemption does not apply 
and the general fiduciary responsibility provisions of section 404 of 
the Act, which require, among other things, a fiduciary to discharge 
his or her 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 
requirements of section 401(a) of the Code that the plan operate for 
the exclusive benefit of the employees of the employer maintaining the 
plan and their beneficiaries;
    (2) The exemption does not extend to transactions prohibited under 
section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;
    (3) In accordance with section 408(a) of the Act, section 
4975(c)(2) of the Code, and the procedures set forth in 29 CFR 2570, 
Subpart B (55 FR 32836, August 10, 1990), the Department finds that the 
exemption is administratively feasible, in the interest of the plan and 
of its participants and beneficiaries and protective of the rights of 
participants and beneficiaries of the plan;
    (4) The exemption is supplemental to, and not in derogation of, any 
other provisions of the Act and the Code, including statutory or 
administrative exemptions. 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
    (5) This exemption is subject to the express condition that the 
facts and representations set forth in the notice of proposed exemption 
relating to PTE 85-131 and the proposal underlying this grant notice, 
accurately describe, where relevant, the material terms of the 
transaction that was consummated pursuant to this exemption.

Exemption

    Under the authority of section 408(a) of the Act and section 
4975(c)(2) of the Code and in accordance with the procedures set forth 
in 29 CFR Part 2570, Subpart B (55 FR 32836, August 10, 1990), the 
Department hereby amends and replaces PTE 85-131. Accordingly, 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, effective May 8, 2002, to the sale by the Watkins Master 
Trust (the Trust) of its leasehold interests in certain improved real 
property, consisting of a building (the Building), the improvements 
constructed thereon (the Improvements), and a ground lease (the Ground 
Lease), to Watkins Associated Industries, Inc. (Watkins), a party in 
interest with respect to the Trust, in connection with an amendment to 
an option to purchase provision contained in a written lease between 
the Trust and Watkins, as described in Prohibited Transaction Exemption 
85-131 (50 FR 32333, August 9, 1985).
    This exemption is subject to the following conditions:
    (a) All terms and conditions of the sale were at least as favorable 
to the Trust as those obtainable in an arm's length transaction with an 
unrelated party;
    (b) The sale was a one-time transaction for cash;
    (c) The fair market value of the Trust's leasehold interests in the 
Building, the Improvements and the Ground Lease was determined by 
qualified, independent appraisers in initial and updated appraisal 
reports;
    (d) The Trust did not pay any real estate fees, commissions, costs 
or other expenses in connection with the sale;
    (e) The Trust received, as consideration for the sale, an amount 
that was no less than the greater of (1) the fair market value of the 
Trust's leasehold interests in the Building, the Improvements and the 
Ground Lease; or (2) the Trust's total investment in such property, as 
of the date of the sale;
    (f) In the event the Trust could not obtain a release from the 
owner of the Ground Lease from its obligations thereunder upon the 
completion of the sale, Watkins agreed to assume all liabilities under 
such lease and indemnify the Trust against any liability to the owner 
of the Ground Lease; and
    (g) The Trustee, as the independent fiduciary for the Trust with 
respect to the sale, determined that such transaction was in the best 
interest of the Trust and was protective of the participants and 
beneficiaries of the Trust, and monitored such transaction on behalf of 
the Trust.

EFFECTIVE DATE: This exemption is effective as of May 8, 2002.
    The availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application for exemption are true and complete and accurately describe 
all material terms of the transactions. In the case of continuing 
transactions, if any of the material facts or representations described 
in the applications change, the exemption will cease to apply as of the 
date of such change. In the event of any such change, an application 
for a new exemption must be made to the Department.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant PTE 85-131 and this final 
exemption, refer to the proposed exemptions and the grant notice which 
are cited above.


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    Signed at Washington, DC, this 19th day of August, 2002.
Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 02-21432 Filed 8-21-02; 8:45 am]
BILLING CODE 4510-29-P