Grant of Individual Exemption To Amend and Replace Prohibited
Transaction Exemption (PTE) 90-15, Involving the Watkins Master Trust
(the Trust), Located in Atlanta, GA
[08/22/2002]
Volume 67, Number 163, Page 54486-54487
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 2002-40; Exemption Application No. D-
11038]
Grant of Individual Exemption To Amend and Replace Prohibited
Transaction Exemption (PTE) 90-15, 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 90-15.
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SUMMARY: This document contains a final exemption before the Department
of Labor (the Department) that amends and replaces PTE 90-15 (55 FR
12967, April 6, 1990). PTE 90-15 is an individual exemption providing
relief, since September 20, 1989, for (1) the leasing of office space
in a commercial office building (the Building) by the Trust to Wilwat
Properties, Inc. (Wilwat), a party in interest with respect to the
plans (the Plans) participating in the Trust under the provisions of a
written lease (the New Lease); and (2) the possible cash purchase of
the Trust's interest in the property by Wilwat.
The final exemption modifies an option to purchase provision in the
New Lease by allowing Wilwat to acquire the Trust's leasehold interests
in the Building, including the improvements constructed thereon, and
the Trust's interest in a ground lease on May 8, 2002, instead of at
any time during the final six months of the New Lease renewal term
ending on December 31, 2008. In addition, the exemption replaces PTE
90-15, 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 41521
that would amend and replace PTE 90-15. PTE 90-15 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 Wilwat,\*\ 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 requested to the Secretary of Labor.
Accordingly, this exemption is being issued solely by the Department.
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\*\ The Department also has under consideration a similar
exemption request (D-11036) that was filed on behalf of Watkins
Associated Industries, Inc., the sponsor of the Trust and a party in
interest with respect to the Plans partcipating in the Trust.
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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.
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-11038) 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 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 administrative
exemptions. Furthermore, the fact that a transaction is subject to an
administrative 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 90-15 and this notice, accurately describe, where
relevant, the material terms of the transactions to be consummated
pursuant to this exemption.
[[Page 54487]]
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 90-15. 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 ground lease (the Ground
Lease), to Wilwat Properties, Inc. (Wilwat), 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
Wilwat, as described in Prohibited Transaction Exemption 90-15 (55 FR
12967, April 6, 1990).
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, Wilwat agreed to assume all liabilities under
such lease and would 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 90-15 and this final
exemption, refer to the proposed exemptions and the grant notice which
are cited above.
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. 02-21433 Filed 8-21-02; 8:45 am]
BILLING CODE 4510-29-P
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