Grant of Individual Exemption To Replace Prohibited Transaction
Exemptions (PTEs) 81-56, 85-19 and 89-5, Involving the Truman Arnold
Companies Retirement Plan and Trust (the Plan) Located in Texarkana, TX [04/16/2003]
Volume 68, Number 73, Page 18710-18711
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2003-06; Exemption Application No. D-
11059]
Grant of Individual Exemption To Replace Prohibited Transaction
Exemptions (PTEs) 81-56, 85-19 and 89-5, Involving the Truman Arnold
Companies Retirement Plan and Trust (the Plan) Located in Texarkana, TX
AGENCY: Employee Benefits Security Administration, Department of Labor.
ACTION: Grant of individual exemption to replace PTEs 81-56, 85-19 and
89-5.
-----------------------------------------------------------------------
SUMMARY: This document contains a final exemption before the Department
of Labor (the Department) which will replace PTEs 81-56 (46 FR 36273,
July 17, 1981), 85-19 (50 FR 3045, January 23, 1985) and 89-5 (54 FR
4348, January 30, 1989). These are individual exemptions (the Prior
Exemptions) that were previously issued by the Department to the Truman
Arnold Companies, a party in interest with respect to the Plan. Each of
the Prior Exemptions permitted the Employer to contribute and/or lease
from the Plan certain improved real property under the provisions of
three distinct written leases.
The final exemption incorporates many of the facts and
representations contained in the Prior Exemptions and updates
information to the extent there have been changes. Because it appears
that PTE 81-56 expired on September 30, 1999 and the parties have not
been covered by an administrative exemption since that time, the final
exemption provides retroactive exemptive relief from October 1, 1999
until September 30, 2002. In addition, to resolve uncertainty regarding
the expiration dates of the leases described in PTE 81-56 and PTE 85-
19, the exemption merges the leases, along with the lease described in
PTE 89-5, under a new master lease (the Master Lease) and provides
retroactive exemptive relief, effective October 1, 2002, with respect
to such past and continued lease arrangements.
Further, the final exemption permits the replacement of AmSouth
Bank, the Plan's former independent fiduciary, with Regions Bank, the
Plan's current trustee. Thus, the exemption affects participants and
beneficiaries of the Plan, as well as Plan fiduciaries.
EFFECTIVE DATE: This exemption is effective from October 1, 1999 until
September 30, 2002 with respect to the leasing arrangement described in
PTE 81-56. In addition, this exemption applies retroactively from
October 1, 2002 with respect to the consolidation of the properties
described in the Prior Exemptions under the Master Lease.
FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady, Office of Exemption
Determinations, Employee Benefits Security Administration, U.S.
Department of Labor, telephone (202) 693-8556. (This is not a toll-free
number.)
SUPPLEMENTARY INFORMATION: On February 6, 2003, the Department
published a notice of proposed exemption in the Federal Register at 68
FR 6205. The proposed exemption would replace PTEs 81-56, 85-19 and 89-
5. The Prior Exemptions provided exemptive relief from the prohibited
transaction restrictions 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).
The proposed exemption was requested in an application filed on
behalf of the Plan 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.
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 March 24, 2003. All
comments were to be made a part of the record. During the comment
period, the Department received no written comments or requests for a
public hearing.
For further information regarding the exemption application or
other matters discussed therein, interested persons are encouraged to
obtain copies of the exemption application file (Exemption Application
No. D-11059) 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 Employee Benefits Security 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,
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
[[Page 18711]]
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 notices of proposed
exemption relating to PTEs 81-56, 85-19, 89-5 and this notice,
accurately describe, where relevant, the material terms of the Master
Lease transaction 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 PTEs 81-56, 85-19 and 89-5.
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 (1) effective October 1, 1999 until September 30,
2002, to the leasing by the Plan of a parcel of real property and the
improvements thereon (the New Facilities Property), as described in
Prohibited Transaction Exemption (PTE) 81-56 (46 FR 36273, July 17,
1981), to the Truman Arnold Companies, Inc. (the Employer), a party in
interest with respect to the Plan; and (2) effective October 1, 2002,
to the leasing, by the Plan to the Employer, under the provisions of a
master lease (the Master Lease) of the New Facilities Property, another
parcel of real property and the improvements comprising the Employer's
headquarters (the Home Site Property), as described in PTE 85-19 (50 FR
3045, January 23, 1985), and two buildings (the Buildings) constructed
on the Home Site Property and described in PTE 89-5 (54 FR 4348,
January 30, 1989). (The New Facilities Property, the Home Site Property
and the Buildings are collectively referred to herein as the
``Properties.'')
This exemption is subject to the following conditions:
(a) The terms of the Master Lease remain at least as favorable to
the Plan as those obtainable in an arm's length transaction with an
unrelated party.
(b) The Employer is obligated under the terms of the Master Lease
for expenses incurred by the Properties, including taxes and
assessments, maintenance, insurance and utilities.
(c) The interests of the Plan with regard to the Master Lease are,
at all times, represented by an independent fiduciary. Such independent
fiduciary--
(i) Represents the interests of the Plan for the remaining duration
of the Master Lease;
(ii) Monitors the terms and conditions of the Master Lease on
behalf of the Plan;
(iii) Enforces compliance with all conditions of the Master Lease;
(iv) Ensures that the Master Lease remains in the best interest of
the Plan and protective of the Plan's participants and beneficiaries;
(v) Following review and evaluation of the Master Lease, determines
that the retention of the Properties by the Plan and the continued
leasing of such Properties to the Employer are in the best interest of
the Plan and its participants and beneficiaries;
(vi) Adjusts the rental rate under the Master Lease every third
year such lease is in effect based upon independent appraisals of the
Properties and ensures that the rentals equal the greater of 14 percent
of the fair market value of the Properties or the prior rental amounts
paid; and
(vii) Takes all actions that are necessary and proper to enforce
and protect the rights of the Plan and its participants and
beneficiaries.
(d) The rental rate under the Master Lease, during its initial term
and each renewal term remains at 14 percent of the fair market value of
the Properties, which amount is not less than the current fair market
value of such Properties;
(e) The aggregate fair market value of the Properties that are
subject to the Master Lease, at no time, exceeds 25 percent of the
Plan's assets.
For a more complete statement of the facts and representations
supporting the Department's decision to grant the Prior Exemptions and
this final exemption, refer to the proposed exemptions and their
respective grant notices which are cited above.
Signed at Washington, DC, this 11th day of April, 2003.
Ivan L. Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, Department of Labor.
[FR Doc. 03-9354 Filed 4-15-03; 8:45 am]
BILLING CODE 4510-29-M
|
