Prohibited Transaction Exemption 2003-32; [Exemption Application
No. D-11067] et al.; Grant of Individual Exemptions; Sorensen
Broadcasting Employee Stock Ownership Plan and Trust, et al [11/14/2003]
Volume 68, Number 220, Page 64657-64660
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
Prohibited Transaction Exemption 2003-32; [Exemption Application
No. D-11067] et al.; Grant of Individual Exemptions; Sorensen
Broadcasting Employee Stock Ownership Plan and Trust, et al
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Grant of individual exemptions.
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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).
A notice was published in the Federal Register of the pendency
before the Department of a proposal to grant such exemption. The notice
set forth a summary of facts and representations contained in the
application for exemption and referred interested persons to the
application for a complete statement of the facts and representations.
The application has been available for public inspection at the
Department in Washington, DC. The notice also invited interested
persons to submit comments on the requested exemption to the
Department. In addition the notice stated that any interested person
might submit a written request that a public hearing be held (where
appropriate). The applicant has represented that it has complied with
the requirements of the notification to interested persons. No requests
for a hearing were received by the Department. Public comments were
received by the Department as described in the granted exemption.
The notice of proposed exemption was issued and the exemption is
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 exemption is administratively feasible;
(b) The exemption is in the interests of the plan and its
participants and beneficiaries; and
(c) The exemption is protective of the rights of the participants
and beneficiaries of the plan.
Sorenson Broadcasting Employee Stock Ownership Plan and Trust (the
Plan); Located in Sioux Falls, SD
[Prohibited Transaction Exemption 2003-32; Exemption Application No. D-
11067]
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,\1\ shall not apply to (1) the sale (the Sale) by the Plan to
Sorenson Broadcasting Corporation (the Employer), a party in interest
with respect to the Plan, of 930 shares of common stock (the Common
Stock) of the Employer; and (2) the extension of credit by the Plan to
the Employer under the terms of a subsequent adjustment to the Sale
price (the True-up) in connection with the Sale.
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\1\ For purposes of this exemption, references to provisions of
Title I of the Act, unless otherwise specified, refer also to
corresponding provisions of the Code.
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This exemption is subject to the following conditions:
(a) The Sale occurs in the following manner:
(1) The Employer pays the Plan the fair market value of the Common
Stock as of December 31, 2002, as determined by a qualified,
independent appraiser, plus certain positive adjustments indicated in
an addendum to a purchase agreement dated May 26, 2000;
(2) The fair market value of the Common Stock as of the transaction
date (the Closing Value) is determined no later than two months after
the transaction date;
(3) As additional consideration, the Plan receives the difference
between the
[[Page 64658]]
Closing Value and the amount paid for the Common Stock on the
transaction date (i.e., the True-up), plus interest based on the New
York prime market rate, effective on the transaction date until the
date of the True Up; and
(4) As collateral for the True-up, Mr. Dean Sorenson, the principal
shareholder of the Employer, deposits $100,000 in cash in an escrow
account for the benefit of the Plan to ensure that the Employer honors
its obligation under the True-up.
(b) The Plan does not pay any commissions or other expenses with
respect to the Sale.
(c) The transactions are approved by an independent fiduciary, who
will monitor such transactions on behalf of the Plan.
(d) The Plan's trustees determine that the Sale and True-up are
appropriate transactions for the Plan and in the best interests of the
Plan and its participants and beneficiaries.
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 September 5, 2003 at 68
FR 52791.
FOR FURTHER INFORMATION CONTACT: Ms. Anna M.N. Mpras of the Department,
telephone (202) 693-8565. (This is not a toll-free number.)
Liberty Media 401(k) Savings Plan (the Plan); Located in Englewood,
Colorado
[Prohibited Transaction Exemption No. 2003-33; Application No. D-11170]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (b)(2) and
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, effective November 25, 2002, to (1)
the acquisition of certain stock rights (the Rights) by the Plan in
connection with a Rights offering by Liberty Media Corporation (LMC), a
party in interest with respect to the Plan; (2) the holding of the
Rights by the Plan during the subscription period of the offering; and
(3) the exercise of the Rights by the Plan. This exemption is
conditioned upon the adherence to the material facts and
representations described herein and upon the satisfaction of the
following requirements:
(a) The Rights were acquired pursuant to Plan provisions for
individually-directed investment of such accounts;
(b) The Plan's receipt of the Rights occurred in connection with
the Rights offering made available to all shareholders of common stock
of LMC;
(c) All decisions regarding the holding and disposition of the
Rights by the Plan were made, in accordance with the Plan provisions
for individually-directed investment of participant accounts, by the
individual Plan participants whose accounts in the Plan received the
Rights in connection with the offering;
(d) The Plan's acquisition of the Rights resulted from an
independent act of LMC as a corporate entity, and all holders of the
Rights, including the Plan, were treated in the same manner with
respect to the acquisition; and
(e) The Plan received the same proportionate number of the Rights
as other owners of Liberty Media Series A and Series B common stock
(the Stock).
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 15, 2003 at 68 FR
49302.
FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department,
telephone (202) 693-8540 (this is not a toll-free number).
Hayden O. Grona IRA (the IRA); Located in San Antonio, Texas
[Prohibited Transaction Exemption 2003-34; Application No. D-11192]
Exemption
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 proposed sale of certain unimproved land (the
Property) by the IRA to Mr. Grona's children (the Children),
disqualified persons with respect to the IRA;\2\ provided that the
following conditions are met:
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\2\ Pursuant to CFR 2510.3-2(d), there is no jurisdiction with
respect to the IRA under Title I of the Act. However, there is
jurisdiction under Title II of the Act, pursuant to section 4975 of
the Code.
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(a) the sale is a one-time cash transaction;
(b) the IRA receives the current fair market value for the
Property, as established at the time of the sale by an independent,
qualified appraiser; and
(c) the IRA 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 September 5, 2003 at 68
FR 52795.
FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department
at (202) 693-8540. (This is not a toll-free number.)
Newspaper Agency Corporation; Pension Trust (the Plan); Located in Salt
Lake City, Utah
[Prohibited Transaction Exemption 2003-35; Application No. D-11194]
Exemption
I. Transactions
The restrictions of sections 406(a)(1)(A)-(D), 406(b)(1), and
406(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 \3\ shall not apply to: (1) The leasing of certain
improved real property (the Property) by the Plan to the Newspaper
Agency Corporation (the Employer), a party in interest with respect to
the Plan, pursuant to the terms of a lease (the New Lease), effective
August 1, 2003; and (2) the guarantee by MediaNews Group, Inc. and
Deseret News Publishing Company (collectively, the Owners of the
Employer) of the obligations of the Employer under the terms of the New
Lease.
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\3\ For purposes of this exemption, references to specific
provisions of Title I of the Act, unless otherwise specified, refer
to the corresponding provisions of the Code.
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II. Conditions
This exemption is conditioned upon the adherence to the material
facts and representations described herein and upon the satisfaction of
the following requirements:
(a) an independent, qualified fiduciary (the I/F), acting on behalf
of the Plan, determines that each of the subject transactions is
feasible, in the interest of, and protective of the Plan and the
participants and beneficiaries of such Plan;
(b) the I/F manages the Property on an on-going basis and is
empowered to take whatever action it deems appropriate to serve the
best interest of the Plan and its participants and beneficiaries,
including but not limited to the retention, leasing, or sale of the
Property;
(c) the fair market value of the Property does not now and will at
no time exceed twenty-five percent (25%) of the fair market value of
the total assets of the Plan;
(d) the I/F negotiates, reviews, and approves the terms of the
subject transactions;
(e) the terms and conditions of the subject transactions are, and
will at all times be, no less favorable to the Plan than terms
obtainable by the Plan under similar circumstances when negotiated at
arm's length with an unrelated third party;
[[Page 64659]]
(f) an independent, qualified appraiser determines the fair market
value of the rental of the Property, as of August 1, 2003, and annually
thereafter;
(g) the I/F monitors compliance with the terms of the New Lease
throughout the duration of such lease and is responsible for legally
enforcing the payment of the rent and the proper performance by the
Employer and/or the Owners of the Employer of all other obligations of
the Employer under the terms of such lease;
(h) the Plan incurs no fees, costs, commissions, or other charges
or expenses as a result of its participation in the transactions which
are the subject of this exemption, other than the fee payable to the I/
F for services rendered to the Plan and the fee payable to the
independent, qualified appraiser for the annual appraisal of the fair
market value of the Property;
(i) the I/F ensures that the terms and conditions described herein
are at all times satisfied;
(j) the I/F will place the Property on the market for sale or lease
to unrelated third parties, within fifteen (15) calendar days of the
date of the publication of the grant of this exemption in the Federal
Register, and subject to the termination of the New Lease, as provided
in section II(k), below, of this exemption, will proceed to sell or
lease such Property to any such unrelated third party who presents a
bona fide sale or lease offer which the I/F determines to be prudent
and in the best interest of the Plan and its participants and
beneficiaries; and
(k) notwithstanding anything to the contrary in the New Lease, the
Plan may at any time upon six (6) month prior written notice to the
Employer terminate the New Lease and the Employer's occupancy of the
Property, effective as of the date specified in such notice, which date
shall be at least six (6) months after the date such written notice is
given to the Employer (but in no event extending the New Lease beyond
the then current lease term.
Effective Date: The exemption will be effective August 1, 2003.
Written Comments
In the Notice of Proposed Exemption (the Notice), the Department of
Labor (the Department) invited all interested persons to submit written
comments and requests for a hearing on the proposed exemption within
forty-five (45) days of the date of the publication of the Notice in
the Federal Register on September 5, 2003. All comments and requests
for a hearing were due by October 20, 2003.
The Department received, on October 20, 2003, a letter from the
applicant, informing the Department of a correction to the language of
the exemption, as proposed. In this regard, in the Notice on page
52796, Part I, lines 16-17, the reference to ``Deseret News Publishing
Corporation'' should be revised to read ``Deseret News Publishing
Company.'' The Department acknowledges the correction and in the final
exemption has amended the language of Part I, as requested in the
October 20, 2003, letter from the applicant.
In addition, on October 20, 2003, the Department received a comment
letter, from the Executive Board and Chief Steward of the Graphic
Communications International Union, Local 28N (the Local). Accompanying
this comment letter was a petition signed by 153 individuals who are
employees of the Employer and members of the Local. In this regard, the
commentators requested denial of the exemption. In support of this
request, the commentators state that: (a) The Employer has not
maintained the premises of the Property, because upon completion of
construction on a new building, the Employer wants to ``walk away''
leaving ``an almost worthless piece of property'' in the Plan; (b) all
employees will be adversely affected by the grant of the exemption; (c)
the exemption should not be allowed without proper and meaningful
negotiations between the union(s) and the Employer; and (d) a hearing
should be scheduled, in the event negotiations between the union(s) and
the Employer break down.
At the close of the comment period, the Department forwarded a copy
of the comment letter to the applicant and requested that the applicant
respond in writing to the issues raised by the commentators.
With regard to the commentators' assertion that the Employer has
not maintained the Property, the applicant points out that the Property
is a warehouse constructed of cement block. As such, the greatest
expense involved in maintaining the Property has been that of
maintaining the roof. In this regard, it is represented that the
Employer has expended substantial sums in maintaining the Property. For
example, since June of 2001, the Employer has paid a total of
$112,809.67 to replace over two-thirds (2/3) of the roof ($49,891 paid
on June 30, 2001, and an additional $62,918.67 paid during 2002). It is
represented that the Employer also pays for janitorial services for the
Property two (2) times per week.
In response to the comment that the Property is ``an almost
worthless piece of property,'' the applicant points out that the fair
market value of the Property is $1,700,000, as evidenced by the written
appraisal of the independent appraiser selected by the I/F. In
addition, the applicant points out that the Property has increased in
value over the period from 1971 to 2003 from $259,000 to $1,700,000,
being an increase in value of over 650% (or an average of slightly over
20% per year over the term of 32 years). In addition to appreciation in
the value of the Property, the Employer, as the tenant, has made fair
market value rental payments to the Plan and also paid for the taxes,
liability and casualty insurance premiums, maintenance, and repairs.
In response to the comment that all employees will be adversely
affected by the grant of the exemption, the applicant represents that
the Plan is a defined benefit pension plan under which the participant
benefits are calculated without regard to the value of the underlying
plan assets as they exist from time to time. Accordingly, it is
represented by the applicant that benefits of Plan participants are not
adversely affected by approval of the exemption request. In this
regard, the applicant points out that the exemption deals with the
leasing of the Property under the terms of the New Lease between the
Employer and the Plan which includes various provisions which are
favorable to the Plan, including but not limited to the following:
(a) the Employer, as the tenant, is required to pay fair market
value lease payments to the Plan, redetermined annually by independent
appraisal (in addition to taxes, insurance and other expenses); and
(b) upon six months written notice to the Employer, the Plan may
unilaterally terminate the New Lease for any reason. The applicant
notes that the Employer does not have the right to terminate the New
Lease prior to the end of the primary three (3) year term. Further, the
applicant points out that the exemption includes a condition requiring
the I/F, within fifteen (15) days following publication of the grant of
the exemption in the Federal Register, to place the Property on the
open market so that the Plan has adequate time (in essence, almost a
three (3) year period) to find a buyer for the Property.
In the opinion of the applicant, the comment that the exemption
should not be allowed without proper and meaningful negotiations
between the union(s) and the Employer appears to
[[Page 64660]]
reflect the desire of the Local to use the exemption application
process as a means to open pension negotiations with the Employer. As
the exemption application by the Employer does not request or result in
any amendment to the Plan or any change in the benefits provided to
participants under the Plan, it is the position of the applicant that
the requested exemption should not constitute a trigger for union
benefit negotiations.
Further, the applicant suggests that the genesis of the request for
denial of the exemption application included in the comment letter
appears to arise from some disappointment or ill will from prior
negotiations involving issues unrelated to the exemption application.
In the opinion of the applicant, such feelings as to unrelated matters
are irrelevant to and should not be the catalyst for denial of the
requested exemption.
In response to the comment requesting a hearing be scheduled if
union negotiations break down, the applicant maintains that the
exemption application does not affect the benefits of the participants
under the Plan and should not involve union negotiations. Further, the
applicant points out that the comment letter does not include any facts
supporting a conclusion that any participant would be adversely
affected by the grant of the exemption requested. In the opinion of the
applicant, a hearing should not be required, as all factual data and
documents have already been provided to the Department of Labor, and
any issues discussed in the comment letter can be fully explored, if
deemed necessary by the Department of Labor, through the submission of
evidence in written form.
The Department, after reviewing the concerns of the commentators,
does not believe that there are material issues relating to the subject
exemption that were raised by the commentators during the comment
period which would require the convening of a hearing. Accordingly, the
Department has determined not to delay consideration of the final
exemption by holding a hearing on application D-11194.
After giving full consideration to the entire record, including the
written comment from the commentators, the applicant's response to such
comments, and the applicant's own comment, the Department has decided
to grant the exemption, as described and amended, above. In this
regard, the comment letter from the commentators, the applicant's
response thereto, and the comment letter from the applicant which were
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 Documents Room of
the Employee Benefits Security Administration, Room N-1513, U.S.
Department of Labor, 200 Constitution Avenue, NW., Washington, DC
20210.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption refer to
the Notice published on September 5, 2003, at 68 FR 52796.
FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc, of the
Department, telephone (202) 693-8540. (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 exemption 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) This exemption is 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
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 this exemption is subject to the express
condition that the material facts and representations contained in the
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, DC, this 7th day of November, 2003.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, Department of Labor.
[FR Doc. 03-28545 Filed 11-13-03; 8:45 am]
BILLING CODE 4510-29-P
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