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]
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.
[[Page 54486]]
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
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