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Employee Benefits Security Administration

EBSA Federal Register Notice

Grant of Individual Exemptions; R. G. Daily Company, Inc. Defined Benefit Plan (the Plan) [05/13/2005]

[PDF Version]

Volume 70, Number 92, Page 25614-25616

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2005-05; Exemption Application No. D-
11212, et al.]

 
Grant of Individual Exemptions; R. G. Daily Company, Inc. Defined 
Benefit Plan (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 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.

R.G. Dailey Company, Inc. Defined Benefit Plan (the Plan) Located in 
Ann Arbor, MI

[Prohibited Transaction Exemption 2005-05; Exemption Application No. 
D-11212]

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,\1\ 
shall not apply to the in kind contributions made to the Plan on August 
12, 1999, June, 12, 2000, May 17, 2001 and March 21, 2002 by the 
Employer, a disqualified person with respect to the Plan, of certain 
publicly-traded securities (the Securities), provided: (a) Each 
contribution was a one-time transaction; (b) the Securities were valued 
at their fair market value as of the date of the contribution, as 
listed on a national securities exchange; (c) no commissions were paid 
in connection with the transactions; (d) the terms of the transactions 
between the Plan and the Employer were no less favorable to the Plan 
than terms negotiated at arm's length under similar circumstances 
between unrelated parties; and (e) Mr. Dailey, who was the only person 
affected by the transactions, believes that the transactions were in 
the best interest of the Plan.
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    \1\ Because Mr. Robert M. Dailey was the sole sponsor of the 
R.G. Dailey Company, Inc. (the Employer) and the only participant in 
the Plan, there is no jurisdiction under Title I of the Employee 
Retirement Income Security Act of 1974 (the Act). However, there is 
jurisdiction under Title II of the Act pursuant to section 4975 of 
the Code.

EFFECTIVE DATE: This exemption is effective for in kind contributions 
of Securities to the Plan occurring on the following dates: August 12, 
1999, June 12, 2000, May 17, 2001 and March 21, 2002.
    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 March 23, 2005 at 70 FR 
14718.

Written Comments

    During the comment period, the Department received one written 
comment and no requests for a public hearing. The comment was submitted 
by the applicant and is intended to clarify the proposal. Basically, 
the comment concerns the date the Plan was terminated. In the Summary 
of Facts and Representations of the proposal, Representation 2 states 
that the Plan was terminated on May 31, 2002. However, the applicant 
wishes to clarify that the Plan termination amendment was signed on 
March 22, 2002 and became effective on March 31, 2002.
    In response to the applicant's comment, the Department notes the 
foregoing clarifications to the proposal.
    Accordingly, after giving full consideration to the entire record, 
including the applicant's comment, the Department has determined to 
grant the requested exemption. For further information regarding the 
comment and other matters discussed herein, interested persons are 
encouraged to obtain copies of the exemption application file 
(Exemption Application No. D-11212) 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.

FOR FURTHER INFORMATION CONTACT: Mr. Arjumand A. Ansari of the 
Department at (202) 693-8566. (This is not a toll-free number.)

Riggs Bank N.A. (Riggs Bank), Washington, D.C.; and the PNC Financial 
Services Group, Inc. (PNC), Pittsburgh, Pennsylvania

[Prohibited Transaction Exemption 2005-06; Exemption Application No. 
D-11310]

Exemption

Section I. Riggs Bank N.A.
    Riggs Bank shall not be precluded from functioning as a ``qualified

[[Page 25615]]

professional asset manager'' (``QPAM'') pursuant to Prohibited 
Transaction Exemption 84-14 (49 FR 9494, March 13, 1984) (``PTE 84-
14'') beginning on the date of the acquisition of Riggs National 
Corporation, the parent of Riggs Bank, by PNC, solely because of a 
failure to satisfy section I(g) of PTE 84-14 as a result of the 
conviction of Riggs Bank for the felony described in the January 27, 
2005 felony information (the ``Information'') entered in the U.S. 
District Court for the District of Columbia, provided that:
    (a) This exemption is not applicable if Riggs becomes affiliated 
with any person or entity convicted of any of the crimes described in 
section I(g) of PTE 84-14, unless such person or entity already has 
been granted an exemption to continue functioning as a QPAM pursuant to 
PTE 84-14;
    (b) This exemption is not applicable if Riggs is convicted of any 
of the crimes described in section I(g) of PTE 84-14, other than the 
specific felony charged in the Information;
    (c) An independent auditor, who has appropriate technical training 
or experience and proficiency with Title I of ERISA's fiduciary 
responsibility provisions, shall conduct an audit of Riggs Bank's ERISA 
custody and fiduciary asset management functions. This audit will be 
commenced not later than June, 2005. It will be completed and a report 
setting forth the procedures conducted and the results obtained will be 
sent to the Department as soon as possible, but in no event later than 
September 30, 2005;
    (d) The audit described above will cover the following matters for 
the period commencing in March, 1999 and ending with the date of the 
closing of the Riggs-PNC transaction (the Time Period): Reconciliations 
(to determine that reconciliations and settlements are performed 
accurate and timely, and outstanding items are monitored and cleared in 
a timely manner); unitizations (to determine that daily processes, 
including trade requests, valuation and reconciliation of unitized 
assets are authorized and properly performed, are consistent with 
liquidity requirements and to ensure that unitized assets evaluations 
are valid); conversions (to determine that adequate controls are in 
place and working effectively to ensure that conversions are completed 
accurately, in a timely manner, and in accordance with the client's 
contract); fees (to determine that controls over the fee assessment and 
collection process are adequately designed and operating accurately and 
effectively); annual and monthly statements (to determine that 
statements are prepared accurately and distributed to clients 
independently and within the required frequency and time frame); 
training (to determine that account administrators and administrative 
assistants are adequately trained, including with respect to the 
requirements of ERISA); system authorization (to determine whether 
there are controls in place to ensure access to systems is authorized, 
approved and limited based on employees' particular duties and 
responsibilities); new accounts (to determine controls in place to 
ensure new accounts receive appropriate approvals and are accurately 
set up for future required reviews and other account activities); the 
adequacy of the written policies and procedures adopted by Riggs to 
ensure compliance with the terms of the QPAM exemption (other than 
paragraph 1(g) of PTE 84-14), and the requirements of Title I of ERISA 
(including ERISA's prohibited transaction provisions and applicable 
statutory and administrative exemptions); and compliance (through a 
test of a representative sample of transactions of client plans during 
the Time Period) with: (1) The written policies and procedures that it 
has adopted and (ii) the objective requirements of Title I of ERISA and 
PET 84-14 (other than paragraph 1(g) of PTE 84-14);
    (e) Any irregularities identified as a results of the audit will be 
promptly corrected; and
    (f) On the closing of the acquisition transaction, PNC will apply 
the same internal control and audit policies and procedures applied and 
enforced with respect to its pre-existing ERISA fiduciary asset 
management functions to the ERISA custody and fiduciary asset 
management functions formerly associated with Riggs Bank.
Section II. PNC
    PNC and its affiliates shall not be precluded from functioning as a 
QPAM pursuant to PTE 84-14 beginning on the date of the acquisition of 
Riggs National Corporation, the parent of Riggs Bank, by PNC, solely 
because of a failure to satisfy section I(g) of PTE 84-14 as a result 
of the conviction of Riggs Bank for the felony described in the 
Information entered in the U.S. District Court for the District of 
Columbia, provided that:
    (a) This exemption is not applicable if PNC or any affiliate 
becomes affiliated with any person or entity convicted of any of the 
crimes described in section I(g) of PTE 84-14, unless such person or 
entity already has been granted an exemption under PTE 84-14; and
    (b) This exemption is not applicable if PNC or any affiliate is 
convicted of any of the crimes described in section I(g) of PTE 84-14, 
other than the conviction of Riggs Bank for the specific felony charged 
in the Information.
Section III. Definitions
    (a) For purposes of this exemption, the term ``Riggs'' means and 
includes Riggs Bank and any entity that was affiliated with Riggs Bank, 
including but not limited to its corporate parent Riggs National 
Corporation, prior to the date of acquisition of Riggs National 
Corporation by PNC.
    (b) For purposes of this exemption, the term ``PNC'' includes PNC 
Financial Services Group, Inc. and any entity that was affiliated with 
PNC Financial Services Group, Inc. prior to the date of acquisition of 
Riggs National Corporation by PNC, and any future affiliates, other 
than Riggs Bank, as defined in such seciton (a).
    (c) The term ``affiliate'' of a person means--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person,
    (2) Any director of, relative of, or partner in, any such person,
    (3) Any corporation, partnership, trust or unincorporated 
enterprise of which such person is an officer, director, or a 5 percent 
or more partner or owner, and,
    (4) Any employee or officer of the person who--
    (A) Is a highly compensated employee (as defined in section 
4975(e)(2)(H) of the Code) or officer (earning 10 percent or more of 
the wages of such person) or;
    (B) Has direct or indirect authority, responsibility or control 
regarding the custody, management or disposition of plan assets.
    (d) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    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 March 23, 2005 at 70 FR 
14729.
    Written Comments: The Department received one written comment with 
respect to the proposed exemption. The comment was submitted on behalf 
of an employee benefit plan with assets invested in the Riggs Bank-
trusteed Multi-Employer Property Trust. The commenter noted that the 
exemption as proposed provides relief only for the period after Riggs 
is purchased by PNC. The commenter requested modification

[[Page 25616]]

of the exemption to permit Riggs to function as a QPAM for the interim 
period between the March 29, 2005 sentencing of Riggs and the 
acquisition of Riggs by PNC, during which time Riggs will operate as a 
stand-alone entity, as well as for the period of time after it is 
acquired by PNC.
    The Department notes that the acquisition of Riggs by a large 
financial institution was an important factor in the Department's 
determination to propose exemptive relief. The Department has concluded 
that it is unable to make the findings required by section 408(a) of 
the Act necessary to provide relief covering the interim period between 
the sentencing of Riggs and the acquisition of Riggs by PNC. In the 
absence of the availability of PTE 84-14 for this interim period, it is 
the responsibility of Riggs to ensure that it has not engaged in any 
prohibited transactions for which there is no other exemptive relief.
    Accordingly, the Department has considered the entire record, 
including the one comment received, and has determined to grant the 
exemption as it was proposed.

FOR FURTHER INFORMATION CONTACT: Mr. Gary H. Lefkowitz of the 
Department, telephone (202) 693-8546. (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 10th day of May, 2005.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 05-9578 Filed 5-12-05; 8:45 am]

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