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Prohibited Transaction Exemption 2005-01; [Exemption Application No. D-11211] et al.; Grant of Individual Exemptions; J.C.O., Inc. Retirement Plan and Trust (the Plan) [02/03/2005]
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Volume 70, Number 22, Page 5701-5705
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
Prohibited Transaction Exemption 2005-01; [Exemption Application
No. D-11211] et al.; Grant of Individual Exemptions; J.C.O., Inc.
Retirement Plan and Trust (the Plan)
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
[[Page 5702]]
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.
J.C.O., Inc. Retirement Plan and Trust (the Plan)
Located in Boulder, Colorado
[Prohibited Transaction Exemption 2005-01; Exemption Application No. D-
11211]
Exemption
The restrictions of sections 406(a), 406(b)(1) and 406(b)(2) of the
Act and the sanctions resulting from the application of section 4975 of
the Code,\1\ by reason of section 4975(c)(1)(A) through (E) of the
Code, shall not apply to (1) the cash sale (the Sale) of certain
improved real property (the Property) to the Plan by Cynthia G. Vogels,
a party in interest with respect to the Plan and a 50% shareholder of
J.C.O., Inc. (JCO), the Plan sponsor; and (2) the simultaneous lease
(the New Lease) of the Property by the Plan to JCO.
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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 terms and conditions of the transactions are not less
favorable to the Plan than those obtainable in an arm's length
transaction between unrelated parties.
(b) The Sale is a one-time transaction for cash.
(c) The acquisition price that is paid by the Plan for the Property
is not more than the fair market value of the Property as determined by
a qualified, independent appraiser on the date of the Sale.
(d) The value of the Property that is acquired by the Plan does not
exceed 20% of the Plan's assets at the time of the Sale nor throughout
the duration of the New Lease.
(e) The Plan does not pay any real estate fees, commissions or
other expenses with respect to the transactions.
(f) Mrs. Vogels indemnifies and holds the Plan harmless from any
liability arising from the Sale, including but not limited to hazardous
materials found on the Property, violation of zoning or land use
regulations or restrictions, and violations of federal, state or local
environmental regulations or laws.
(g) The New Lease is a triple-net lease under which the JCO, as
lessee, pays, in addition to the base rent, all expenses incurred by
the Property, including all taxes and assessments, insurance,
maintenance, utilities and any other expenses.
(h) The annual rental amount under the New Lease is the higher of
$40,800 or the fair market rental value of the Property, as determined
by a qualified, independent appraiser on the date the New Lease is
entered into by the parties.
(i) The rent payable under the New Lease is adjusted every year
after the first 12 months of the New Lease by an amount equal to the
percentage increase in the Consumer Price Index for All Urban Consumers
for the Denver Metropolitan Area. In addition, the Property is
reappraised every five years by a qualified, independent appraiser
selected by the Plan's independent fiduciary and the independent
fiduciary then adjusts the rental for the Property based on the
appraisal. However, in no event is the rent adjusted below the rental
amount paid for the preceding year.
(j) The Plan is represented at all times and for all purposes with
respect to the Sale and the New Lease by a qualified, independent
fiduciary.
(k) The Plan's independent fiduciary has negotiated, reviewed, and
approved the terms and conditions of the Sale and the New Lease and has
determined that the transactions are appropriate for the Plan and in
the best interests of the Plan's participants and beneficiaries.
(l) The Plan's independent fiduciary monitors and enforces
compliance with the terms and conditions of the New Lease and this
exemption throughout the duration of the New Lease.
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 November 30, 2004 at 69
FR 69621.
FOR FURTHER INFORMATION CONTACT: Ms. Anna M.N. Mpras of the Department,
telephone (202) 693-8565. (This is not a toll-free number.)
Roy A. Herberger Defined Benefit Pension Plan (the Plan)
Located in Phoenix, Arizona
[Prohibited Transaction Exemption No. 2005-02; Application No. D-11259]
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 three past in-kind contributions (the Contribution(s))
to the Plan of common stock (the Stock) of Pinnacle West Capital
Corporation (PNW) by Roy A. Herberger, Jr. (the Applicant), a
disqualified party with respect to the Plan,\2\ provided that the
following conditions are met:
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\2\ Since the Applicant is a sole proprietor and the only
participant in the Plan, there is no jurisdiction under Title I of
the Act pursuant to 29 CFR 2510.3-3(b). However, there is
jurisdiction under Title II of the Act pursuant to section 4975 of
the Code.
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(a) The transactions involved publicly traded securities, the fair
market values of which were based upon published prices at the time of
each Contribution;
(b) The cumulative value of the Contributions represented no more
than 18% of the total assets of the Plan;
(c) The Plan has not paid any commissions, costs or other expenses
in connection with the Contributions;
(d) The Applicant, who is the only person affected by the
transactions, believes that the transactions were in the best interest
of the Plan;
(e) The Applicant made the Contributions based on erroneous advice
from his tax adviser; and
(f) The terms of the transactions between the Plan and the
Applicant are no less favorable to the Plan than terms negotiated at
arm's length under similar circumstances between unrelated third
parties.
[[Page 5703]]
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 November 8, 2004 at 69 FR
64787.
FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department,
telephone (202) 693-8540 (this is not a toll-free number).
The National Electrical Benefit Fund (the Plan)
Located in Rockville, MD
[Prohibited Transaction Exemption 2005-03; Exemption Application No. D-
11165]
Exemption
The restrictions of section 406(a)(1)(A) through (D) 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 (D) of the Code, shall
not apply, effective April 1, 2003, to (1) the collateral assignment
(the Collateral Assignment) by the Plan, of its rights and interests in
the Stonegate at Bellefaire, LLC (the LLC), a real estate operating
company, to M&T Real Estate, Inc. (the Senior Lender), a party in
interest with respect to the Plan; and (2) the guaranty (the Guaranty)
by the Plan, executed in favor of the Senior Lender, requiring the Plan
to reimburse the Senior Lender for any losses the Senior Lender may
incur as a result of certain affirmative ``bad acts'' that are
committed by the Plan as a member (the Member) of the LLC.
This exemption is subject to the following conditions:
(a) The Plan's execution of the Collateral Assignment and the
Guaranty was on terms no less favorable to the Plan than those which
the Plan could obtain in an arm's length transaction with an unrelated
party;
(b) The decisions on behalf of the Plan to invest in the LLC and
consent to the terms of the Collateral Assignment and Guaranty in favor
of the Senior Lender were made by fiduciaries which were independent of
and unaffiliated with the Senior Lender;
(c) At the time of the transactions, the Plan had total assets that
were in excess of $5 billion, and not more than 1% of the Plan's total
assets was invested or will be invested in the LLC.
(d) The other Member of the LLC also executed Guaranties in favor
of the Senior Lender;
(e) As a Member of the LLC, the Plan's total potential liability
with respect to its investment in the real estate project (the
Project), which is being developed and will be owned by the LLC, is
limited to:
(1) Capital contributions made by the Plan to the LLC.
(2) Amounts funded by the Plan to the LLC.
(3) Rights and interests given to the Senior Lender under the
Collateral Assignment.
(f) In the event the Plan engages in any of the specified ``bad
acts'' that are described in the Guaranty, the Plan's total potential
liability does not exceed the greater of $32.98 million or the
outstanding principal amount of the loan serving as the primary funding
vehicle for the Project.
EFFECTIVE DATES: This exemption will be effective as of April 1, 2003.
For a 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 November 8, 2004 at 69 FR
64784.
FOR FURTHER INFORMATION CONTACT: Mr. Arjumand A. Ansari of the
Department, telephone (202) 693-8566. (This is not a toll-free number.)
Wheeling-Pittsburgh Corporation and Wheeling Pittsburgh Steel
Corporation
Located in Wheeling, WV
[Prohibited Transaction Exemption 2005-04; Application No. L-11200]
Exemption
The restrictions of sections 406(a)(1)(E), 407(a)(2), 406(b)(1),
and 406(b)(2) of the Act, shall not apply to: (1) The initial
acquisition of 4,000,000 shares on August 1, 2003 (Initial Shares) of
publicly traded Employer Stock through the in-kind contribution of such
Initial Shares, and subsequent in-kind acquisitions of Employer Stock,
by the Wheeling-Pittsburgh Steel Corporation Retiree Benefits Plan (the
Plan) for the purpose of pre-funding welfare benefits provided by the
Plan; and (2) the holding by the Plan of Employer Stock acquired
pursuant to the contributions, provided that the following conditions
are satisfied:
(a) An Independent Fiduciary will represent the Plan and its
participants and beneficiaries for all purposes related to such
contributions for the duration of the Plan's holding of such Employer
Stock and will have sole responsibility relating to the acquisition,
holding, disposition, ongoing management, and voting of Employer Stock.
The Independent Fiduciary will authorize the Trustee to accept or
dispose of Employer Stock only after such Independent Fiduciary
determines, at the time of each transaction, that such transaction is
feasible, in the interest of the Plan, and protective of the
participants and beneficiaries of such Plan, subject to the terms of
the Registration Rights Agreement, Stock Transfer Restriction and
Voting Agreement;
(b) The appropriate fair market value of any Employer Stock
contributed by WPC and WPSC to the Trust will be established by the
Independent Fiduciary;
(c) The Plan or Trust incurs no fees, costs or other charges (other
than those described in the Engagement Letter Agreement and the Trust
Agreement) as a result of any of the transactions described herein;
(d) The terms of any transactions between the Plan and the
Companies will be no less favorable to the Plan than terms negotiated
at arm's length under similar circumstances between unrelated third
parties;
(e) Employer Stock contributed in-kind to the Plan will be held in
a separate account under a Trust which is qualified under section
501(c)(9) of the Code;
(f) The Committee maintains, for a period of six years from the
date of the initial acquisition of shares by the Plan and from the date
of any subsequent contributions of Employer Stock, any and all records
necessary to enable the persons described in paragraph (g) below to
determine whether the conditions of this exemption have been met,
except that: (1) If the records necessary to enable the persons
described in paragraph (g) to determine whether the conditions of the
exemption have been met are lost or destroyed, due to circumstances
beyond the control of the plan fiduciary, then no prohibited
transaction will be considered to have occurred solely on the basis of
unavailability of those records; and (2) no party in interest other
than the Committee shall be subject to the civil penalty that may be
assessed under section 502(i) of the Act if the records are not
maintained, or are not available for examination as required by
paragraph (g) below;
(g)(1) Except as provided below in paragraph (g)(2) and
notwithstanding any provisions of subsections 504(a)(2) and (b) of the
Act, the records referred to in paragraph (f) above shall be
unconditionally available at their customary location for examination
during normal business hours by:
(A) Any duly authorized employee or representative of the
Department;
(B) The USWA or any duly authorized representative of the USWA; and
(C) Any participant or beneficiary of the Plan, or any duly
authorized
[[Page 5704]]
representative of such participant or beneficiary.
(2) None of the persons described above in subparagraphs (B) and
(C) of this paragraph (g) shall be authorized to examine the trade
secrets of WPC or WPSC or commercial or financial information that is
privileged or confidential.
Definitions
(a) For purposes of this exemption, the term ``Independent
Fiduciary'' means a fiduciary with respect to the Plan who is: (1)
Independent of and unrelated to WPC, WPSC or its affiliates; and (2)
appointed to act on behalf of the Plan with respect to the acquisition,
holding, management, and disposition of the shares. In this regard, the
fiduciary will not be deemed to be independent of and unrelated to WPC
and WPSC if: (1) Such fiduciary directly or indirectly controls, is
controlled by or is under common control with WPC or WPSC; (2) such
fiduciary directly or indirectly receives any compensation or other
consideration in connection with any transaction described in this
exemption; except that the Independent Fiduciary may receive
compensation for acting as an Independent Fiduciary from WPC in
connection with the transactions contemplated herein if the amount or
payment of such compensation is not contingent upon or in any way
affected by the Independent Fiduciary's ultimate decision, and (3) the
annual gross revenue received by the Independent Fiduciary, during any
year of its engagement, from WPC exceeds one percent (1%) of the
Independent Fiduciary's annual gross revenue from all sources (for
federal income tax purposes) for its prior tax year;
(c) The term ``Initial Shares'' means the 4,000,000 shares of
common stock of WPC that were contributed to the Trust on August 1,
2003.
(d) The term ``Participant'' shall mean former employees of WPC,
WPSC and its subsidiaries who separated from service from USWA-
represented bargaining units and who are designated as beneficiaries of
the newly-created WPSC Retiree Benefit Plan, as well as any dependent,
surviving spouse or other beneficiary of a bargaining unit retiree who
is entitled to receive benefits under the Plan.
(e) The term ``Plan'' refers to the Wheeling-Pittsburgh Steel
Corporation Retiree Benefits Plan. The Plan is an employee welfare
benefit plan established and maintained by the Committee.
(f) The term ``Shares'' or ``Employer Stock'' means shares of
publicly traded common stock of WPC.
(g) The term ``Trust'' means a Code section 501(c)(9) trust, which
is established for the purpose of funding life, sickness, accident, and
other welfare benefits for the participants and beneficiaries of the
Plan.
(h) ``USWA'' shall mean the United Steelworkers of America, AFL-
CIO-CLC.
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 (the Notice) published on November 30,
2004, at 69 FR 69623.
Written Comments: The applicant (i.e., WPSC) submitted written
comments with respect to the notice of the proposed exemption (the
Proposal). The comments are summarized below.
The applicant requests that the third transaction described in the
first paragraph in the proposed Exemption, which refers to ``the
extension of credit between Wheeling Pittsburgh Corporation (WPC),
Wheeling-Pittsburgh Steel Corporation (WPSC) and the Plan, which will
occur in conjunction with WPC's and WPSC's contributions of Employer
Stock and cash for the benefit of the retirees,'' be omitted due to the
absence of an extension of credit in connection with the contributions
of Employer Stock. The Department acknowledges the applicant's comment
and has revised the grant accordingly.
The applicant states that information concerning the Independent
Fiduciary managing Employer Stock that is contributed to the Plan,
subject to the provisions of the Independent Fiduciary Engagement
Agreement, the Stock Agreement and the Registration Rights Agreement
was not included in Item 6 of the Summary of Facts and Representations
contained in the proposal (the Summary) in describing the
responsibilities of the Independent Fiduciary. The Department
acknowledges the applicant's clarifications to the information
contained in the Summary.
In addition, the applicant states that the fifth paragraph in Item
6 of the Summary indicates that ``the Independent Fiduciary sold 42,000
shares of Employer Stock from March 25, 2004 to April 20, 2004'' and
should have indicated that the Independent Fiduciary actually sold
42,400 shares during this period. The Department acknowledges the
applicant's clarifications to the information contained in the Summary.
The Department received four written inquiries and close to one
hundred telephone calls concerning the Proposal from interested
persons. All of the telephone calls and written inquiries requested
additional information regarding the transactions and the possible
affect on benefits payable to the appropriate Plan participants. The
Department responded to each inquiry by telephone and attempted to
address the issues that were raised. None of the additional comments
made to the Department offered specific suggestions or reasons for
changes to the proposal.
The Department received no other comments. Accordingly, the
Department has determined to grant the exemption, as modified herein.
FOR FURTHER INFORMATION CONTACT: Brian J. Buyniski of the Department,
telephone (202) 693-8545. (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.
[[Page 5705]]
Signed at Washington, DC, this 31st day of January, 2005.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 05-2078 Filed 2-2-05; 8:45 am]
BILLING CODE 4510-29-P
