Skip to page content
Employee Benefits Security Administration

EBSA Federal Register Notice

Proposed Exemptions; The Young Menís Christian Association Retirement Fund-Retirement Plan (the Plan) [07/21/2006]

[PDF Version]

Volume 71, Number 140, Page 41470-41483

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application No. D-11330, et al.]

 
Proposed Exemptions; The Young Men's Christian Association 
Retirement Fund-Retirement Plan (the Plan)

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemptions.

-----------------------------------------------------------------------

SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions 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).

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
requests for a hearing should state: (1) The name, address, and 
telephone number of the person making the comment or request, and (2) 
the nature of the person's interest in the exemption and the manner in 
which the person would be adversely affected by the exemption. A 
request for a hearing must also state the issues to be addressed and 
include a general description of the evidence to be presented at the 
hearing.

ADDRESSES: All written comments and requests for a hearing (at least 
three copies) should be sent to the Employee Benefits Security 
Administration (EBSA), Office of Exemption Determinations, Room N-5700, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210.

[[Page 41471]]

Attention: Application No. ------, stated in each Notice of Proposed 
Exemption. Interested persons are also invited to submit comments and/
or hearing requests to EBSA via e-mail or FAX. Any such comments or 
requests should be sent either by e-mail to: moffitt.betty@dol.gov, or 
by FAX to (202) 219-0204 by the end of the scheduled comment period. 
The applications for exemption and the comments received will be 
available for public inspection in the Public Documents Room of the 
Employee Benefits Security Administration, U.S. Department of Labor, 
Room N-1513, 200 Constitution Avenue, NW., Washington, DC 20210.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990). 
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 requested to 
the Secretary of Labor. Therefore, these notices of proposed exemption 
are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.
    The Young Men's Christian Association Retirement Fund-Retirement 
Plan, (the Plan) Located in New York, NY, [Application No. D-11330].

Proposed Exemption

    Based on the facts and representations set forth in the 
application, the Department is considering granting an exemption under 
the authority of section 408(a) of the Act (or ERISA) 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, 32847, August 10, 1990).

Transactions and Conditions

    (a) If the proposed exemption is granted, the restrictions of 
section 406(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 (D) of the Code, shall not apply, effective July 
1, 2006, to:
    (1) Any arrangement, agreement or understanding between The Young 
Men's Christian Association Retirement Fund-Retirement Plan (the Plan) 
and any participating employer whose employees are covered by the Plan, 
whereby the time is extended for the making of a contribution by such a 
participating employer to such Plan, if the following conditions are 
met:
    (i) Prior to entering into such arrangement, agreement or 
understanding, the Plan has made, or has caused to be made, such 
reasonable, diligent and systematic efforts as are appropriate under 
the circumstances to collect such contribution;
    (ii) The terms of such arrangement, agreement or understanding are 
set forth in writing and are reasonable under the circumstances based 
on the likelihood of collecting such contribution or the approximate 
expenses that would be incurred if the Plan continued to attempt to 
collect such contribution through means other than such arrangement, 
agreement or understanding;
    (iii) Such arrangement, agreement or understanding is entered into 
or renewed by the Plan in connection with the collection of such 
contribution and for the exclusive purpose of facilitating the 
collection of such contribution;
    (iv) The Plan's procedures and the guidelines to be followed in 
undertaking to collect such contributions are described in a notice 
provided to all the employers participating in the Plan. This notice 
details the Plan's standard operating guidelines for the collection of 
late employer contributions (the Notice). The Notice provided to all 
participating employers contains the methodology of the Plan that 
applies with respect to the determination to extend the time period for 
the making of such delinquent contribution or to permit such delinquent 
contribution to be made in periodic payments. New participating 
employers will receive the Notice within 30 days of signing the written 
participation agreement; and
    (v) The extension of time does not apply to any failure of an 
employer to timely remit participant contributions to the Plan.
    (2) A determination by the Plan to consider a contribution due to 
the Plan from any participating employer any of whose employees are 
covered by the Plan as uncollectible and to terminate efforts to 
collect such contribution, if the following conditions are met:
    (i) Prior to making such determination, the Plan has made, or has 
caused to be made, such reasonable, diligent and systematic efforts as 
are appropriate under the circumstances to collect such contribution or 
any part thereof;
    (ii) Such determination is set forth in writing and is reasonable 
and appropriate based on the likelihood of collecting such contribution 
or the approximate expenses that would be incurred if the Plan 
continued to attempt to collect such contribution or any part thereof;
    (iii) The Notice provided to all participating employers, which is 
described in section (a)(1)(iv) above, must also contain the 
methodology used by the Plan with respect to the determination that the 
delinquent contribution is uncollectible and in deciding to terminate 
efforts to collect such contribution; and
    (iv) The determination that the contribution is uncollectible and 
the decision to terminate efforts to collect such contribution do not 
apply to any failure of an employer to timely remit participant 
contributions to the Plan.
    (b) If an employer any of whose employees are covered by the Plan 
enters into an arrangement, agreement or understanding with the Plan as 
described in subparagraph (a)(1) with respect to the payment of such 
contribution, or if the Plan makes a determination described in 
subparagraph (a)(2), such employer shall not be subject to the civil 
penalty which may be assessed under section 502(i) of the Act, or to 
the taxes imposed by section 4975(a) and (b) of the Code, by reason of 
section 4975(c)(1)(A) through (D) of the Code, except in the case of an 
arrangement, agreement or understanding described in subparagraph 
(a)(1), where the terms thereof are clearly unreasonable under the 
circumstances based on the likelihood of collecting such contribution 
or the approximate expenses that would be incurred if the Plan 
continued to attempt to collect such contribution through means other 
than such arrangement, agreement or understanding.
    (c) The Plan maintains for a period of six years the records 
necessary to enable the persons described in paragraph (d)

[[Page 41472]]

below to determine whether the conditions of this exemption have been 
met, except that:
    (1) A prohibited transaction will not be considered to have 
occurred if, due to circumstances beyond the control of the Plan, the 
records are lost or destroyed prior to the end of the six-year period, 
and
    (2) No party in interest other than the Plan's fiduciaries shall be 
subject to the civil penalty that may be assessed under section 502(i) 
of ERISA or to the taxes imposed by section 4975(a) and (b) of the Code 
if the records are not maintained or not available for examination as 
required by paragraph (d) below.
    (d)(1) Except as provided in subparagraph (d)(2) below and 
notwithstanding any provisions of section 504(a)(2) and (b) of ERISA, 
the records referred to in paragraph (c) above are unconditionally 
available at their customary location for examination during normal 
business hours by:
    (i) Any duly authorized employee or representative of the 
Department of Labor or the Internal Revenue Service;
    (ii) Any fiduciary of the Plan or any duly authorized employee or 
representative of such fiduciary;
    (iii) Any participating employer of the Plan; and
    (iv) Any participant or beneficiary of the Plan or duly authorized 
employee or representative of such participant or beneficiary.
    (2) None of the persons described in subparagraph (d)(1)(ii), (iii) 
and (iv) above shall be authorized to examine commercial or financial 
information which is privileged or confidential, or records that are 
unrelated to the Plan.

DATES: Effective Date: This proposed exemption, if granted, will be 
effective as of July 1, 2006, the date of the beginning of the Plan 
year.

Summary of Facts and Representations

    1. The Application for this proposed exemption was submitted on 
behalf of the Young Men's Christian Association Retirement Fund (the 
Sponsor or Fund) and the Plan it sponsors, The Young Men's Christian 
Association Retirement Fund--Retirement Plan (the Plan) with respect to 
the Plan's procedures for the collection of employer contributions from 
participating employers in the Plan for plan years commencing July 1, 
2006 and thereafter. The Applicant states that no provision of the 
proposed exemption would extend to the failure of an employer to timely 
forward participant contributions to the Plan.
    The Fund is the named fiduciary for the Plan and acts as trustee of 
the Plan. The Applicant states that other ERISA fiduciaries include the 
senior officers of the Fund in their capacity as plan administrator. 
These executive officers are employees of the Fund, who may act as plan 
administrator, and they acknowledge fiduciary responsibility in that 
context. The Sponsor will bear the costs of the exemption application 
and notifying interested persons.
    2. The Applicant states that the Plan is a multiple employer church 
money purchase pension plan under Code section 401(a). The Applicant 
further states that as of July 1, 2006, the Plan will be treated as 
having made an election under Code section 410(d) and, thus, will be an 
``electing'' money purchase defined contribution church plan, subject 
to the applicable provisions of ERISA and the Code.\1\ The Sponsor is a 
separately incorporated New York not-for-profit corporation, which was 
established in 1921 for the express purpose of providing retirement 
benefits to employees of Young Men's Christian Associations (YMCAs or 
employers) throughout the United States.
---------------------------------------------------------------------------

    \1\ The Applicant notes that pursuant to legislation passed by 
Congress and signed into law by President Bush on December 21, 2004 
(Pub. L. 108-476) (Legislation), the Sponsor's status as a church 
pension fund (within the meaning of Code section 414(e)(3)(A)) and 
the Plan's status as a defined contribution money purchase church 
pension plan (within the meaning of Code section 414(e)) was 
confirmed.
---------------------------------------------------------------------------

    Since its founding, the Plan has provided retirement benefits to 
the employees of participating YMCAs. As of June 30, 2005, the Plan 
covered more than 75,000 participants, including over 8,600 retired 
participants and beneficiaries. The Plan's participating employers 
consist entirely of separately incorporated YMCAs throughout the United 
States. As of May 5, 2006, there were 967 corporate chartered YMCAs 
that operate 2,600 branches. As of June 30, 2005, the Plan had 920 
participating employers, and in the last year, has received over $168 
million in plan contributions. As of June 30, 2005, the most recent 
available valuation date for the Plan, the aggregate fair market value 
of the Plan's assets was $2,171,230,098, and as of June 30, 2005, the 
fair market value of the total assets that are attributable to the 
contributions to the Plan was approximately $803,355,137. The fair 
market value of the total assets that are attributable to contributions 
made to the Plan in the three year period ending June 30, 2005 was $480 
million of which approximately $400,000 represented delinquent employer 
contributions. The delinquent amounts represent less than one tenth of 
1% of such contribution to the Retirement Plan.
    3. The Applicant states that, under the Plan, a participant's 
benefit is based upon the sum of the contributions made by the 
participant and his employer, plus interest that is periodically 
credited as determined by the Board of Trustees of the Sponsor. 
According to the Applicant, pursuant to the terms of the Plan, 
participation by a YMCA employer in the Plan is voluntary but if a YMCA 
does participate, it is mandatory that the YMCA submit employer 
contributions to the Plan on behalf of all of its eligible employees, 
including employees located at the YMCA's various chapters (also known 
as branches). The Applicant represents that, pursuant to the 
Legislation, commencing with the plan year beginning on July 1, 2006, 
the Plan (but not any reserves held by the Sponsor with respect to such 
Plan or other assets held by the Sponsor) will be treated as having 
made an election under Code section 410(d). At that time, the Plan will 
be treated as an ``electing'' church plan subject to the applicable 
provisions of ERISA and the Code.
    The Applicant notes that, pursuant to Sections 1.4 and 14.3 of the 
Plan, participating YMCA employers are required to sign a written 
participation agreement with the Board of Trustees of the Sponsor, 
pursuant to which the employer agrees to make participation in the Plan 
a condition of employment for all new employees and also agrees to 
enroll its eligible employees and make regular timely payments required 
by the Plan on behalf of its employees. In addition, each participating 
association agrees to permit auditors selected by the Sponsor's Board 
of Trustees to examine the books and records of the participating 
employer to determine whether the participating employer is 
participating in accordance with the provisions of the Plan.
    4. The Applicant asserts that the Plan, like many other multiple 
employer plans, especially plans analogous in size, from time to time 
encounters participating employers who fail to make timely 
contributions to the Plan. This delinquency in the past has resulted 
from various reasons, including personnel changes at the participating 
YMCA which caused an administrative failure to make the contribution on 
time and failures relating to data collection issues at the 
participating employers. These delinquencies have been pursued through 
reasonable, diligent and systematic collection efforts by the Sponsor, 
which require that the employer make up the contributions with 
interest.

[[Page 41473]]

    The YMCA Retirement Fund Collection Procedure submitted by the 
Applicant in a June 28, 2006 correspondence to the Department provides 
that employer contributions are required to be transmitted by the YMCA 
employers to the Fund by the 15th business day of the month following 
the due date. On the 9th business day of the following month, the Fund 
sends an ``urgent reminder'' fax or email to the Plan Administrator of 
the participating employers who have not yet remitted their 
contributions. On the 12th business day, a second notice is sent to the 
employer's CFO and on the 14th business day, a third notice is sent to 
the employer's CEO. On the 16th day, the Fund sends a letter indicating 
contributions are delinquent to the employer's CFO and copies the CEO 
and the Chairman of the employer's Board of Trustees. At 2 months past 
due, a personal letter is sent to the CEO of the employer and at 3 
months past due, a personal letter is sent to the CEO and the Chairman. 
At 4 months past due, the Fund sends a letter to each participant at 
the employer outlining the situation with copies to the CEO and the 
Chairman. At 5 months past due, the Fund sends a letter to the CEO and 
the Chairman detailing the IRS consequences for delinquent 
contributions and offering assistance in working out a payment schedule 
if the YMCA is experiencing ``extreme financial hardship.'' At 6 to 8 
months past due, there are continued efforts to encourage payments by 
the employer and a possible warning of expulsion from the Fund.
    Delinquencies are reported monthly to the corporate offices of the 
YMCA of the U.S.A. and to the appropriate regional Network Consultants 
after the close of the month. Quarterly confirmations are sent to the 
CEO of each employer indicating whether contributions were made timely. 
The Fund's Finance Department periodically runs reports to track any 
employers that are delinquent and the Executive V.P. of the Fund 
maintains a ``Past Due Contributions Report'' on the status of each 
delinquent employer. The Fund's management may determine that yearly 
reminders or questionnaires regarding timely remittance of employer 
contributions should be sent to previously delinquent employers to 
encourage compliance. On occasion, the Fund's internal audit staff will 
conduct on-site reviews to access an employer's compliance.
    5. The Plan will distribute a notice to the participating employers 
describing the Plan's procedures for the collection of late employer 
contributions and the determination by the Plan that a delinquent 
contribution is uncollectible (the Notice).\2\ New participating 
employers will receive the Notice within 30 days of signing the written 
participation agreement. The Notice will provide the participating 
employers with a detailed explanation of the steps used by the Plan to 
determine: the time period for the making of such delinquent 
contribution; whether to permit such delinquent contribution to be made 
in periodic payments; that the delinquent contribution is 
uncollectible; and whether to terminate efforts to collect such 
contribution.
---------------------------------------------------------------------------

    \2\ The Notice will be distributed in conjunction with the 
notice to interested persons that is required to be provided within 
30 days after this proposed exemption is published in the Federal 
Register.
---------------------------------------------------------------------------

    6. The Applicant states that often the delinquency is a result of 
an administrative failure, and as a result of its diligent collection 
efforts, the contributions and interest, are made to the Plan. The 
Applicant notes, however, that in certain situations, the participating 
employer is not able to make the required contributions, for example, 
when the participating employer's solvency is in jeopardy or where 
there are other adverse financial conditions that exist. In such cases, 
the Sponsor still seeks full contributions from the participating 
employer, although often the Sponsor will agree to accept the required 
contributions over a longer period of time in installments until the 
solvency issues are resolved. In rare cases, the Sponsor decides to 
terminate further collection efforts based on the participating 
employer's insolvency coupled with the expense of continued collection 
efforts with respect to such participating employer. The Sponsor may, 
as it deems appropriate, expel a delinquent YMCA employer and preclude 
it from all future participation in the Plan or pursue civil action 
against a delinquent YMCA employer to collect contributions. The 
Applicant further states that, although the Sponsor seeks to prevent 
such delinquent payments through communication and the use of the audit 
function permitted by the Plan, given the size of the Plan, the number 
of participating employers, and the varying size of the workforces at 
the participating employers, it is likely that the Plan will face 
delinquent contributions in the future. This is even more significant 
given the amount of contributions the Plan receives.
    The approximately 920 participating employers in the Plan vary in 
size and financial health, which can at times result in the delinquent 
payment of contributions to the Plan. The Plan, through diligent and 
systematic collection efforts, has been able to recover delinquent 
employer contributions, plus interest. By virtue of the Plan's efforts 
to collect delinquent payments, including extending the time by which 
participating employers must make such contributions, the Plan has 
benefited by increasing the total assets available to provide 
retirement benefits to its participants. By continuing such collection 
efforts, the participants and beneficiaries of the Plan will benefit 
through the receipt of the full amount of their promised plan benefits.
    7. Once the Plan's Code section 410(d) election becomes effective, 
for the July 1, 2006 plan year and plan years thereafter, the Plan will 
be subject to the prohibited transaction provisions of section 406 of 
ERISA. Under ERISA sections 406(a)(1)(B) and 406(a)(1)(D), a fiduciary 
shall not cause a plan to engage in a transaction if he knows or should 
know that such transaction constitutes a direct or indirect (i) lending 
of money or other extension of credit between the plan and a party in 
interest; or (ii) a transfer to, or use by or for the benefit of, a 
party in interest, of any assets of the plan. Section 4975 of the Code 
contains parallel prohibited transaction provisions. By allowing 
participating employers to make payments at a later date, over a longer 
period of time than prescribed by the Plan or in rare instances, 
ceasing collection efforts against a participating employer (where the 
costs of collection may far outweigh the amounts involved), the Plan 
may be viewed as extending credit from the Plan to the participating 
employer, (i.e., a party in interest pursuant to ERISA section 
3(14)(C)), or transferring plan assets to a participating employer in 
violation of ERISA sections 406(a)(1)(B) and 406(a)(1)(D) (and the 
related parallel prohibited transaction provisions under the Code).
    The Applicant represents that the Sponsor, as a church pension fund 
sponsoring a multiple employer church pension plan under the Code, is a 
unique organization. However, in the context of multiple employer plans 
generally, the practice of delaying or extending the time for payment 
of employer contributions under the plan is not uncommon. Prohibited 
Transaction Class Exemption 76-1 (41 FR 12740, Mar. 26, 1976) (PTE 76-
1) provides an exemption from ERISA sections 406(a) and 407(a) for 
multiple employer plans maintained pursuant to one or more collective 
bargaining agreements between an employee organization and more than 
one employer. The preamble to the proposed

[[Page 41474]]

class exemption recognizes that ``multiemployer plans are often 
confronted with the problem of delinquency in participating employer 
contributions * * * and at times one or more participating employers 
may be delinquent in making such contributions.'' 40 FR 23798 (Jun. 2, 
1975). Further, the preamble notes, ``[I]n the course of their 
collection efforts, multiemployer plans frequently delay or extend the 
time for payment of contributions pursuant to understandings, 
arrangements or agreements in circumstances where it appears that 
collection of the full amount due the plan would be jeopardized were 
the plan to attempt to force immediate full payment.'' Id.
    8. The Applicant states that although PTE 76-1 was reserved for 
multiple employer plans \3\ maintained pursuant to a collective 
bargaining agreement, such fact does not decrease the significance of 
the acknowledgement that multiple employer plans (regardless of the 
industry or whether it is pursuant to a collective bargaining 
agreement) face the same issues that were the basis for such class 
exemption. Any multiple employer plan, especially one that is similar 
in size to the Plan, would confront the issue of delinquent 
contributions and the need for reasonable and cost effective collection 
procedures.
---------------------------------------------------------------------------

    \3\ As the Department noted in paragraph (5) of the General 
Information section of the preamble, this class exemption covers not 
only multiemployer plans, but also other multiple employer plans.
---------------------------------------------------------------------------

    The Department notes that the preamble to PTE 76-1 recognized that 
the delinquency problem existed in other contexts in responding to a 
comment received from an employer association, the sponsor of an 
employee benefit plan which was not collectively bargained, that had a 
significant number of unaffiliated employers contributing to the plan. 
The employer association stated that its plan had many of the same 
problems regarding delinquent employer contributions that are 
encountered by multiemployer plans and, therefore, PTE 76-1 should be 
made applicable to plans that are not collectively bargained. The 
Department responded that ``because plans which are not collectively 
bargained are not jointly administered within the meaning of section 
302(c)(5) of the LMRA, the circumstances and safeguards involved in the 
collection of delinquent employer contributions by such plans may be 
different from those involved in collectively bargained, jointly 
administered multiple employer plans.'' The Department further noted 
that the ``letter of comment did not contain sufficient information 
regarding this question and, therefore, the Department and the Service 
are not able at this time to grant a class exemption covering plans 
which are not collectively bargained.'' The Department, however, noted 
that the agencies are ``prepared to consider applications for an 
exemption for transactions involving the collection of delinquent 
employer contributions by employee benefit plans which are not 
collectively bargained.''
    9. The Applicant asserts that the Plan requires employers to make 
contributions in order to provide participants and beneficiaries with 
retirement benefits. To the extent that an employer does not make such 
required contributions, delinquent contributions would directly and 
adversely affect the value of the account balances for the plan 
participants of that employer, which in turn could adversely affect the 
amount converted into a retirement annuity by the Sponsor for such 
participants. As a defined contribution plan, benefits are measured 
directly by the value of a participant's account balance, which account 
is credited with employer contributions. Failure to receive all 
required contributions will diminish a participant's account balance 
value and, thus, his or her retirement benefit amount and post-
retirement financial security. Participants have a reasonable 
expectation that the full amount of their employer's contributions will 
be made on their behalf. The Sponsor's procedure for the recovery of 
delinquent contributions allows the participants' retirement benefit 
expectations to be realized.
    Additionally, the Applicant states that the extended payment plan 
contributions are required under Plan procedures to include lost 
earnings (based upon the Plan's crediting interest rate) and thus, the 
Plan's procedures are designed to make the participants whole.
    The Applicant notes that, because the proposed transaction is 
expected to be a recurring transaction between the Plan and the 
participating employers, the Plan has established specified written 
collection procedures, which create appropriate safeguards that should 
make it feasible for the Department to grant the requested exemption. 
The proposed transaction is in the interests of the Plan and its 
participants and beneficiaries since the ability of the Plan to collect 
employer contributions promotes the purpose of the Plan of providing 
retirement benefits to its participants and beneficiaries. 
Additionally, the ability of the Plan to delay or extend the time for a 
participating employer to make its contributions to the Plan aides the 
Plan in helping a participating employer manage its retirement plan 
obligations when the participating employer is going through a 
difficult financial period or when it experiences personnel changes or 
administrative issues that prevent the employer from making its 
contributions on time.
    The Applicant believes the proposed exemption will permit the Plan 
to facilitate employer participation, which, in turn, supports the 
provision of retirement benefits to all YMCA employees. The proposed 
transaction is protective of the rights of the Plan participants and 
its beneficiaries because the ability to collect delinquent employer 
contributions will result in increased assets for the Plan. The 
Applicant adds that the manner in which collection of such delinquent 
contributions is proposed to be carried out protects participants' and 
beneficiaries' interests.
    10. In summary, the Applicant represents that the proposed 
transactions meet the requirements set forth in the proposed exemption 
in light of the Plan's adoption of procedures for the orderly 
collection of delinquent employer contributions that involve 
reasonable, diligent and systematic methods for the review of employer 
contribution accounts. Prior to the Plan entering into an alternative 
arrangement, agreement or understanding, the Plan uses reasonable, 
diligent and systematic efforts, as appropriate under the 
circumstances, to collect outstanding employer contributions. The terms 
of such arrangement or the Plan's determination to consider a 
contribution due to the Plan as uncollectible and to terminate efforts 
to collect such contribution, are in writing and are reasonable under 
the circumstances in light of the likelihood of collecting the 
contributions weighed against the expenses that would be incurred by 
continuing to attempt to collect the contributions through other means. 
Any arrangement by the Plan in connection with the collection of such 
contributions will be for the exclusive purposes of facilitating the 
collection of such contributions. The Plan's procedures and the general 
guidelines to be followed in undertaking to collect such contributions 
or in determining that the delinquent contribution is uncollectible and 
in deciding to terminate efforts to collect such contribution are 
described in a notice to be provided to all the participating employers 
in the Plan.

[[Page 41475]]

Notice to Interested Persons

    The notice to interested persons, along with the supplemental 
statement required by Department Regulation 2570.43(b)(2), will be 
provided by mailing notices to all terminated YMCA employees who have a 
deferred vested benefit under the Plan by first-class mail to their 
last known address on the books and records of the Fund and to all 
active YMCA employees who currently participate in the Plan by posting 
such notice at their place of employment in those locations which are 
customarily reserved for employer-employee communications or by 
personal delivery. Interested persons include all active employees who 
currently participate in the Plan and all former YMCA employees with 
deferred vested benefits. The notice to interested persons, which will 
contain the information required by Department Regulation Sec.  
2570.43, will be mailed, posted or delivered, as the case may be, 
within 30 days after the Notice of Proposed Exemption is published in 
the Federal Register. The notice to interested persons will inform such 
persons of their right to comment on the proposed exemption within 60 
days after the Notice of Proposed Exemption is published in the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: Wendy M. McColough of the Department, 
telephone (202) 693-8540. (This is not a toll-free number.) Little Rock 
Diagnostic Clinic, P.A., Profit Sharing Plan (the Plan). Located in 
Little Rock, AR, [Application No. D-11350].

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act (or ERISA) 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, 32847, August 10, 1990). 
If the exemption is granted, 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 to the proposed 
cash sale by the Plan of a leased fee interest (the Leased Fee 
Interest) in certain real property (the Property) to LRDC Real Estate, 
LLC (the LLC), a party in interest with respect to the Plan.
    This proposed exemption is subject to the following conditions:
    (a) The sale is a one-time transaction for cash.
    (b) The sales price for the Leased Fee Interest is based on its 
fair market value as established by a qualified, independent appraiser, 
who updates the appraisal on the date the sale is consummated.
    (c) The terms of the proposed transaction are at least as favorable 
to the Plan as those obtainable in an arm's length transaction with an 
unrelated party.
    (d) The Plan does not pay any real estate fees or commissions in 
connection with the sale.
    (e) An independent fiduciary is appointed to approve and monitor 
the sale transaction on behalf of the Plan.
    (f) Within 90 days of the date the notice granting this exemption 
is published in the Federal Register, the Little Rock Diagnostic 
Clinic, P.A. (LRDC), the Plan sponsor, files a Form 5330 with the 
Internal Revenue Service (the Service) and pays all applicable excise 
taxes that are attributed to the past and continued leasing arrangement 
(the Ground Lease) between the Plan and the LRDC Land Company (the Land 
Company) of certain land (the Land) comprising part of the Property.

Summary of Facts and Representations

    1. The Plan is a defined contribution profit sharing plan, which as 
stated above, is sponsored by LRDC. The Plan's current trustees and 
decision makers with respect to Plan investments are Richard W. Houk, 
J. Neal Beaton and Paul Williams (the Trustees). The Trustees are 
employees and shareholders of LRDC, and participants in the Plan.
    As of December 31, 2005, the Plan had 137 participants and 
beneficiaries. As of December 31, 2005, the Plan had approximately 
$23,917,262 in assets.
    2. LRDC is a professional corporation located on the campus of the 
Baptist Medical Center at 10001 Lile Drive, Little Rock, Arkansas. LRDC 
provides medical services in the internal medicine field as well as 
ancillary services such as laboratory work and radiology services.
    3. The Land Company is a general partnership that was created in 
1974 for the sole purpose of leasing real property to LRDC for the 
operation of a medical clinic. The Land Company is owned 24% by current 
shareholder/employees of LRDC. The 76% remainder of the Land Company is 
owned by former shareholder/employees of LRDC and former employees of 
LRDC who were not shareholders of LRDC.
    4. The LLC is a limited liability company that was formed in 2005 
for the purpose of purchasing real estate. The principals of the LLC 
are LRDC physicians. Six of the physician owners are also partners in 
the Land Company.
    5. Among the assets of the Plan is its Leased Fee Interest in the 
Property, which also bears the 10001 Lile Drive address and is legally 
described as ``Lot 4A, Baptist Medical Center Development, City of 
Little Rock, Pulaski County, Arkansas.'' The Plan's Leased Fee Interest 
or ``leased fee estate'' \4\ consists of a present possessory interest 
in approximately 4.444 acres of land that was acquired by the Plan in 
1972 for $56,000 from an unrelated party. The Land is subject to the 
provisions of the Ground Lease executed between the Plan and the Land 
Company. In addition, the Plan's Leased Fee Interest includes a future 
reversionary interest in a 64,945 square foot medical building (the 
Building) that was constructed on the Land by the Land Company in 1976. 
The Land Company leases the Building to LRDC. At the conclusion of the 
Ground Lease, both the Land and the Building will revert to the Plan. 
The Land and the Building, which are together referred to herein as 
``the Property,'' are contiguous to other real property owned by the 
LLC.\5\
---------------------------------------------------------------------------

    \5\ The term ``leased fee estate'' refers to an ownership 
interest held by a landlord with the right of use and occupancy 
conveyed by lease to others. The rights of the lessor (the leased 
fee estate owner) and the lessee are specified by contract terms 
contained within the lease. See APPRAISAL INSTITUTE, THE DICTIONARY 
OF REAL ESTATE APPRAISAL (4th ed. 2002).
    \6\ Specifically, in Final Authorization Number 2005-11E (July 
11, 2005), the Department approved a transaction involving the sale 
by the Plan to the LLC of a 2.2 acre tract of vacant real property 
(Tract 2), that is adjacent to the subject Property.
---------------------------------------------------------------------------

    6. On July 20, 1982, the Department granted Prohibited Transaction 
Exemption (PTE) 82-126 at 47 FR 31457. PTE 82-126 permitted the Plan to 
lease the Land \6\ underlying the Building to the Land Company under 
the provisions of the Ground Lease. In addition, PTE 82-126 allowed the 
Plan to subordinate its title on the leased premises to the mortgage 
lien holder of the Building constructed thereon, which was an unrelated 
bank.
---------------------------------------------------------------------------

    \6\ Although PTE 82-126 states that the Land consists of 4.368 
acres, this description is in error and should have been revised to 
read ``4.444 acres.''
---------------------------------------------------------------------------

    The Ground Lease was divided into two parts. It had a temporary 
term beginning April 1, 1974 and ending July 31, 1975, and a permanent 
term of 25 years, beginning August 1, 1975 and ending July 31, 2000. 
The rent for the temporary term was equal to the 1974 real estate taxes 
and any other taxes assessed against the premises. The rent for the 
permanent term was equal to $27,000 per year subject to adjustment 
every five years based on the Cost of

[[Page 41476]]

Living Index published by the Department. At the time the proposal 
underlying PTE 82-126 was published in the Federal Register (see 47 FR 
22251, May 21, 1982), the annualized rent being paid to the Plan was 
$41,196 or $3,433 per month, which was in excess of fair market value. 
The Ground Lease was triple net to the Plan and it could be extended 
for two additional five year terms, provided appropriate notice was 
given to the Plan.
    Pursuant to an agreement dated May 8, 1974 and commencing August 1, 
1975 for a period of 25 years (but subject to extensions), the Land 
Company started leasing the Building to LRDC under the provisions of a 
written lease (the Building Lease). Rents generated from the Building 
Lease were intended to pay the Land Company's obligations under the 
Ground Lease and to amortize its indebtedness under the mortgage. (In 
effect, LRDC also commenced subleasing the Land from the Land Company 
under the established leasing arrangements.)
    Eventually, the Trustees and the Land Company proposed to amend the 
Ground Lease to provide for annual cost of living adjustments. On April 
8, 1982, the partners of the Land Company, who had a net worth in 
excess of $8 million agreed to indemnify the Plan from all losses, 
damages, and expenses the Plan might sustain by the subordination of 
its title under the terms of an indemnification agreement. No other 
modifications of the Ground Lease were made.
    The fair market rental value of the amended Ground Lease was 
determined by Ronald E. Bragg, MAI, a qualified, independent appraiser. 
In an appraisal report dated August 28, 1981, Mr. Bragg placed the fair 
market rental value of the Land at $3,161.67 per month or $37,940, 
annually. Mr. Bragg also determined that the fair market value of the 
Land was $271,000 as of August 1981.
    On September 10, 1981, Twin City Bank (TCB) of North Little Rock, 
Arkansas, was appointed as an ``independent real estate investment 
manager.'' In this capacity, TCB had sole responsibility and discretion 
to direct the Trustees regarding the management of real property held 
by the Plan. TCB was responsible for making the determination that the 
amended Ground Lease was an appropriate and suitable investment for the 
Plan and in the best interests of the Plan's participants and 
beneficiaries. TCB was required to reconsider the appropriateness of 
the amended Ground Lease prior to the time of its execution and to 
monitor and enforce the terms of such lease on behalf of the Plan, 
including making demand for timely payment, bringing suit in the event 
of a breach, keeping accurate records regarding computations of the 
cost-of-living adjustments, and reporting annually to the Trustees.
    Further, TCB reviewed the subordination provision of the amended 
Ground Lease.\7\ In this regard, TCB determined that the subordination 
provisions were in accordance with normal business practices and the 
requirements of lenders in the area and this factor did not alter its 
opinion of the contemplated transactions.
---------------------------------------------------------------------------

    \7\ The original loan for the construction of the Building was 
$1.35 million. At the time PTE 82-126 was proposed, the loan balance 
was approximately $1.2 million. TCB estimated that the fair market 
value of the Building was $2.28 million as of July 1, 1980 and that 
there was sufficient equity present to protect the Plan and its 
participants.
---------------------------------------------------------------------------

    On December 31, 1983, the Ground Lease was again amended to make 
the cost of living adjustment annual instead of once every five years 
and to remove an option to purchase provision. In addition, the base 
period for the calculating the cost of living adjustment was revised to 
``June 30, 1980'' instead of ``December 31, 1981.''
    7. The Ground Lease is currently in its first five year extension 
and there is no mortgage encumbering the Building.\8\ As of August 31, 
2005, the amount of monthly rental was $7,994, which is above fair 
market rental value. At the end of the Ground Lease on July 31, 2010, 
the Land and the Building will revert to the Plan.\9\ Although it is 
represented that the provisions of the Ground Lease have been complied 
with by the parties (i.e., rent has been paid in a timely manner and 
there have been no defaults or delinquencies), LRDC acknowledges that 
the ``independent real estate investment manager'' described in the 
proposal to PTE 82-126 was not always present to oversee such lease. 
Accordingly, LRDC has agreed to file a Form 5330 with the Service 
within 90 days of the date the notice granting this proposed exemption 
is published in the Federal Register and pay all applicable excise 
taxes that are attributed to the past and continued prohibited leasing 
of the Land between the Plan and the Land Company under the Ground 
Lease, due to the lack of oversight of such lease on a continuing basis 
by a qualified, independent fiduciary.\10\
---------------------------------------------------------------------------

    \8\ Similarly, the Building Lease is subject to two five year 
extensions.
    \9\ The term ``reversionary right'' refers to ``the right to 
possess and resume full and sole use and ownership of real property 
that has been temporarily alienated by a lease, an easement, etc.; 
[sic] may become effective at a stated time or under certain 
conditions, e.g., the termination of a leasehold, the abandonment of 
a right of way, the end of the estimated economic life of the 
improvements.'' See APPRAISAL INSTITUTE, THE DICTIONARY OF REAL 
ESTATE APPRAISAL (4th ed. 2002).
    \10\ The Department is of the view that the presence of an 
independent fiduciary to represent the Plan's interest with respect 
to the Leased Fee Interest was a material factor in the Department's 
determination to grant exemptive relief. Accordingly, PTE 82-126 was 
no longer effective when TCB stopped acting on behalf of the Plan as 
the ``independent real estate investment manager.''
---------------------------------------------------------------------------

    8. Although there has been development around the vicinity of the 
Property, the value of the Property has not appreciated significantly 
in recent years. Moreover, the Building is a single-use building that 
was constructed in 1976. Due to the age of the Building, significant 
improvements would be required to bring it up to current medical office 
standards. The Property has been on the market since December 2001 but 
it has drawn no firm offers. In order that the Plan may divest itself 
of its Leased Fee Interest in the Property, the Trustees propose to 
sell such interest to the LLC. Accordingly, an administrative exemption 
is requested from the Department.
    If the exemption is granted, the sale will allow the Plan to 
convert the Property into a liquid asset and provide a better 
opportunity for growth and permit Plan participants to direct their 
account balances in the Plan into other investment vehicles. Also, in 
order to pay participants who will retire in the coming years, a 
significant amount of liquidity will be needed in the Plan's portfolio. 
Therefore, a cash sale of the Property will provide the needed 
liquidity. Furthermore, due to its ownership of a Leased Fee Interest, 
the Plan's options for administration and management are limited.
    9. The proposed sale will be a one-time transaction for cash. The 
sales price for the Leased Fee Interest will be based upon its fair 
market value, as determined by a qualified, independent appraiser on 
the date the sale is consummated. Moreover, the Plan will not be 
required to pay any real estate fees or commissions in connection with 
the transaction.
    10. The Property has been appraised annually by Mr. Ronald Bragg, 
the same qualified, independent appraiser utilized in PTE 82-126. Mr. 
Bragg represents that he is independent of the parties involved in the 
proposed transaction, and states that he derives less than 1% of his 
gross annual revenues from LRDC and its affiliates. Mr. Bragg also 
states he is aware that his appraisal will be used by the LLC for 
purposes of obtaining an administrative exemption from the Department.

[[Page 41477]]

    In an appraisal report dated January 6, 2006 (the 2006 Appraisal), 
Mr. Bragg states that the Property rights being appraised are the 
rights of the holder of a ``leased fee estate.'' Mr. Bragg notes that 
this ownership interest does not confer to the Plan direct ownership 
rights in the Building. However, he explains that the Plan will have 
reversion rights to the Building upon the termination of the Ground 
Lease. For these reasons, Mr. Bragg does not believe the sales 
comparison approach or the cost approach to valuation is applicable. 
Nonetheless, he states that the sales comparison approach will be 
utilized in projecting the future reversion value of the Property.
    Therefore, Mr. Bragg concludes in the 2006 Appraisal that the only 
approach to valuation that can directly address the ownership benefits 
that accrue to the Plan is the income capitalization approach. He 
explains that the ownership benefits are limited to the Plan's right to 
receive rental income under the Ground Lease and the right to the 
reversion of the Land and the Building at the termination of the Ground 
Lease. Under the income capitalization approach, he notes that the 
valuation would consist of a discounted cash flow analysis based upon 
the projected net cash flows to be generated under the terms of the 
Ground Lease and the projected reversion. This analysis would include 
current rent, projections of future rent increases as required by the 
Ground Lease, and an estimate of the net reversion value upon the 
termination of the Ground Lease.
    Mr. Bragg states that based on his inspection, investigation and 
analysis of the Property, it is his opinion that the fair market value 
of the Leased Fee Interest was $3.1 million as of December 31, 2005. In 
making this determination, Mr. Bragg projected the Plan's reversionary 
interest in the Property at $4.6 million upon the termination of the 
Ground Lease. Then, selecting a discount rate of 12% to discount the 
Property's income stream, Mr. Bragg arrived at the $3.1 million 
estimated market value of the Leased Fee Interest. Mr. Bragg will 
update his appraisal on the date of the sale.
    Thus, based upon the 2006 Appraisal, the Leased Fee Interest 
represents approximately 13% of the Plan's assets.
    11. In an addendum to the 2006 Appraisal dated January 9, 2006, Mr. 
Bragg has provided three related value issues concerning the subject 
Property: (a) The fee simple value of the Property, as if unencumbered 
by the Ground Lease; (b) the contributory present value of the 
projected future reversion value of the Property; and (c) the 
relationship between the current rent paid by the Land Company under 
the Ground Lease and the current fair market ground rent.
    With respect to the fee simple value of the Property, Mr. Bragg 
states that it would be the fair market value of the Property if it 
were not encumbered by either the Ground Lease or the Building Lease. 
In the 2006 Appraisal, he states that he provided an estimate of $4.6 
million as the projected reversion value of the Property upon the 
termination of the Ground Lease. He says this estimate of value can 
also be considered as an estimate of the fee simple value of the 
Property at that point in time when it is no longer encumbered by 
either the Ground Lease or the Building Lease.
    With respect to the contributory present value of the Property upon 
the termination of the Ground Lease, Mr. Bragg again utilizes the $4.6 
million projected reversion value for the Property. He also has 
utilized a discount rate of 12% in converting the projected reversion 
value (and the projected ground rent) into an indication of present 
value. On the basis of his calculations, Mr. Bragg concludes that the 
projected reversion value of $4.6 million, four years and seven months 
from January 9, 2006, discounted at 12% would be $2,736,476.
    As for the relationship between contract rent under the Ground 
Lease and the current fair market ground rent, Mr. Bragg states that if 
the Ground Lease was negotiated today, the first year's rent would be 
based upon 10% of the fee simple value of the Land ($700,000). Mr. 
Bragg explains that the annualized rent would be $70,000 or $5,833.33 
per month. Because the current ground rent of $7,994 per month is 
contract rent, Mr. Bragg further explains that such rent substantially 
exceeds the fair market rental value of the Land. He notes that this is 
not a recent occurrence.
    12. With respect to the proximity of the subject Property to other 
real property owned by the LLC (i.e., Tract 2, see Footnote 2), Mr. 
Bragg maintains that the proximity of the Property to Tract 2 had no 
impact on his estimate of the fair market value of the Leased Fee 
Interest and that no premium is warranted. In this regard, Mr. Bragg 
notes that there is an abundance of vacant, undeveloped land on the 
Baptist Medical Center Campus and it is ``basic supply and demand that 
creates value.'' According to Mr. Bragg, market value does not consider 
the specific buyer and seller but rather the market at large. Although 
Mr. Bragg concedes that the Property is adjacent to Tract 2, he states 
that the Property is also contiguous to vacant land along its southern 
and western sides. Due to the presence of the vacant land, Mr. Bragg 
represents that prospective buyers would have choices. Therefore, he 
does not believe the LLC should be required to pay a premium in order 
to acquire the Leased Fee Interest.
    13. The Bank of Ozarks (the Bank) located in Little Rock, Arkansas 
will act on behalf of the Plan as the independent fiduciary with 
respect to the proposed sale. Specifically, the Bank through its Trust 
Division, has agreed to undertake the duties of the independent 
fiduciary. The Bank is a custodian of plan assets only and it maintains 
no retail banking relationship with LRDC, its affiliates, or their 
principals.
    Writing on behalf of the Bank, Mr. Rex W. Kyle, President of the 
Bank's Trust Division states, in a letter dated January 4, 2006, that 
the Bank is an Arkansas state-chartered bank with trust powers. He 
explains that the Trust Division administers and/or manages in excess 
of $500 million in accounts which include ERISA accounts.
    Mr. Kyle states that the Bank is the largest state chartered bank 
fiduciary in Arkansas and has $2.1 billion in assets. Moreover, he 
indicates that the Bank's staff has over 150 years of combined 
experience and has served as both an independent and special trustee in 
various fiduciary capacities. Mr. Kyle represents that the Bank 
understands and accepts its duties, responsibilities and liabilities 
under the Act in serving as independent fiduciary for the Plan.
    14. In determining whether the sale transaction is in the best 
interest of the Plan and its participants and beneficiaries, Mr. Kyle 
states that the Bank has relied on various appraisals of the Property, 
including the 2006 Appraisal. Based on these appraisals, Mr. Kyle 
states that the sale would permit the conversion of an illiquid 
investment with potentially high future maintenance costs into cash. 
Mr. Kyle also notes that the Building is over 20 years old and 
extensive renovations would be necessary to modernize it. He explains 
that without these renovations, LRDC would be required to move. Because 
there are no potential tenants in the immediate area, Mr. Kyle 
indicates that the Plan would hold an asset that would generate no 
income.
    Mr. Kyle states that based on the 2006 Appraisal, the sale is 
consistent with sales of similar properties which might be achieved in 
the marketplace. He also indicates that the sale would eliminate any 
conflict of interest and associated administrative burdens of ongoing 
supervision that would be involved in continuing the Ground Lease. 
Moreover, Mr. Kyle notes that the current rent

[[Page 41478]]

under the Ground Lease exceeds fair market rent for the Land.
    Additionally, Mr. Kyle states that the sale would allow a greater 
portion of the Plan's assets to be allocated to participant-directed 
accounts and would lower the overall cost of administration of the 
Plan.
    As independent fiduciary, the Bank will monitor the sale 
transaction on behalf of the Plan and take all actions that are 
necessary and proper to enforce and protect the rights of the Plan and 
its participants and beneficiaries. In this regard, the Bank will be 
given full and complete discretion regarding all aspects of the sale.
    15. In summary, it is represented that the proposed sale 
transaction will satisfy the statutory criteria for an exemption under 
section 408(a) of the Act because:
    (a) The sale will be a one-time transaction for cash.
    (b) The sales price for the Leased Fee Interest will be based on 
its fair market value as established by a qualified, independent 
appraiser, who will update the appraisal on the date of the sale is 
consummated.
    (c) The terms of the sale will be at least as favorable to the Plan 
as those obtainable in an arm's length transaction with an unrelated 
party.
    (d) The Plan will not pay any real estate fees or commissions in 
connection with the sale.
    (e) An independent fiduciary will approve and monitor the proposed 
sale transaction on behalf of the Plan.
    (f) Within 90 days of the date the notice granting this exemption 
is published in the Federal Register, LRDC will file a Form 5330 with 
the Service and pay all applicable excise taxes that are attributed to 
the past and continued prohibited leasing of the Land under the 
provisions of the Ground Lease.

Notice to Interested Persons

    Notice of the proposed exemption will be given to interested 
persons within 5 calendar days of the publication of the notice of 
proposed exemption in the Federal Register. The notice will be provided 
to active participants in the Plan by personal delivery and it will be 
mailed by first-class mail to all others. The notice will inform 
interested persons of their right to comment on and/or to request a 
hearing with respect to the proposed exemption. Comments and requests 
for a hearing are due within 35 days of the publication of the proposed 
exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms. Ekaterina A. Uzlyan, U.S. 
Department of Labor, telephone (202) 693-8552. (This is not a toll-free 
number).
    American Maritime Officers Safety & Education Plan (the S&E Plan); 
American Maritime Officers Pension Plan (the Pension Plan); American 
Maritime Officers Vacation Plan (the Vacation Plan); American Maritime 
Officers Medical Plan (the Medical Plan); and American Maritime 
Officers 401(k) Plan (the 401(k) Plan); (Collectively the AMO Plan(s)). 
Located in Dania Beach, Florida and Toledo, Ohio, [Exemption 
Application Nos. L-11148; D-11149; L-11150; L-11151; D-11152; and D-
11153].

Proposed Exemption

    The Department is considering granting the following exemption 
under the authority of section 408(a) of the Act and in accordance with 
the procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 
August 10, 1990).

Section I

    If the exemption is granted, the restrictions of sections 406(a) 
and 406(b)(1) and (b)(2) of the Act shall not apply to: (1) the S&E 
Plan entering into an arrangement with the American Maritime Officers 
(the Union), which is a party in interest with respect to the AMO 
Plans, for the Union to pay the S&E Plan, where appropriate and at the 
rate established by the independent fiduciary (the I/F), for the 
portion of the Union trustees' food and lodging provided by the S&E 
Plan that is attributable to attendance at certain Union meetings 
(Union Transactions) at the Dania Beach, Florida (the Dania Beach 
facility) and Toledo, Ohio (the Toledo facility) (collectively, the 
Facilities); (2) the S&E Plan entering into an arrangement with the 
Union and certain contributing employers, who are parties in interest 
with respect to the AMO Plans, to pay the S&E Plan at a rate 
established by the I/F, for food and lodging provided by the S&E Plan 
at the Facilities for the representatives of the Union and the 
respective contributing employers that is attributable to attendance at 
various conferences (Conference Transactions); and (3) the S&E Plan 
entering into an arrangement with the governing bodies of the American 
Maritime Officers Joint Employment Committee (the JEC), and the 
American Maritime Officers Service (AMOS), who are parties in interest 
with respect to the AMO Plans, to pay the S&E Plan at a rate 
established by the I/F, for food and lodging provided by the S&E Plan 
at the Facilities (Non-Plan Transactions).

Section II

    If the exemption is granted, the restrictions of sections 406(a) 
and 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, shall not apply to: (1) The AMO 
Plans sharing expenses based on an internal expense allocation model 
(the Allocation Model) for the provision of food and lodging by the S&E 
Plan at the Facilities to the AMO Plans' trustees (the Trustees) 
(Collectively the Trustee Transactions); and (2) The AMO Plans, the JEC 
and AMOS sharing expenses based on the Allocation Model for the 
provision of food and lodging by the S&E Plan at the Facilities 
(Professionals' Transactions).

Section III

    If the exemption is granted, the restrictions of sections 406(a) 
and 406(b)(1) and (b)(2) of the Act shall not apply to: (1) 
Contributing employers contracting with the S&E Plan to provide one of 
its regular courses at a special time (Specially Scheduled Training); 
and (2) The S&E Plan designing training programs or undertaking special 
research or modeling that is tailored to the needs of a particular 
contributing employer or its vessels (Specially-Designed Training).

Conditions

    This proposed exemption is subject to the following conditions:
    (a) Each AMO Plan will pay its appropriate share of expenses based 
on the Allocation Model;
    (b) The I/F retained by the AMO Plans will:
    (1) Make a determination of whether the proposed transactions (the 
Transaction(s)) are prudent and in the best interest of the relevant 
AMO Plan(s);
    (2) Establish the terms for each of the Transactions, including:
    (i) The price to be charged for the services provided pursuant to 
the Transactions; and
    (ii) The terms and conditions ensuring that the Transactions are 
fair to the involved AMO Plans;
    (3) Develop policies and guidelines for the implementation of the 
Transactions;
    (4) Monitor the Transactions on an on-going basis, including 
periodic reviews of the Transactions, to ensure compliance with the I/F 
policies and guidelines;
    (5) On a periodic basis, review the terms of each of the 
Transactions, including the fair market value of the services provided; 
and

[[Page 41479]]

    (6) Prepare an annual report, summarizing the Transactions for that 
year;
    (c) The costs associated with recordkeeping and all forms of 
independent oversight will be included in the daily rate established by 
the I/F for food and lodging provided by the S&E Plan at the 
Facilities;
    (d) An independent auditor will perform annual audits of all the 
AMO Plans to identify and reconcile any discrepancies regarding the 
recordkeeping involving the Transactions and provide an annual 
evaluation of all allocation models and produce approval letters 
explicitly affirming that the models are satisfactory;
    (e) The Room Master Software System (RM Software) will create an 
invoice for lodging and food service accounting functions and related 
services at the Facilities;
    (f) The AMO Plans' fiduciaries maintain or cause to be maintained, 
for a period of six years from the date of the covered transactions, 
such records as are necessary to enable the persons described in 
paragraph (g) to determine whether the conditions of this exemption 
were 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 AMO Plans' fiduciaries, then no prohibited transaction will be 
considered to have occurred solely on the basis of the unavailability 
of those records; and
    (2) No party in interest, other than the AMO Plans' fiduciaries 
responsible for recordkeeping, shall be subject to the civil penalty 
that may be assessed under section 502(i) of the Act or to the taxes 
imposed by section 4975(a) and (b) of the Code 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 the provisions of section (a)(2) and (b) of section 504 
of the Act, the records referred to above in paragraph (f) are 
unconditionally available for examination during normal business hours 
at their customary location by the following persons or an authorized 
representative thereof:
    (i) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service;
    (ii) any fiduciary of the AMO Plans or any duly authorized employee 
or representative of such fiduciary; or
    (iii) any contributing employer and any employee organization whose 
members are covered by the AMO Plans, or any authorized employee or 
representative of these entities; or
    (iv) any participant or beneficiary of the AMO Plans or the duly 
authorized employee or representative of such participant or 
beneficiary.
    (2) None of the persons described in paragraphs (ii), (iii) and 
(iv) of paragraph (g)(1) shall be authorized to examine trade secrets 
or commercial or financial information which is privileged or 
confidential.

Summary of Facts and Representations

Description of the AMO Plans

    The S&E Plan is a multiemployer training plan funded pursuant to a 
collective bargaining agreement. The purposes of the S&E Plan are to 
(a) develop and execute programs for the education, development and 
improvement of licensed marine officers, (b) develop and execute 
programs to increase safety in the operation of marine vessels, (c) 
create and execute programs to develop and maintain a skilled pool of 
licensed marine officers and (d) develop and execute a research program 
on a variety of issues of interest to S&E Plan participants and their 
employers. The S&E Plan conducts training at the Facilities and 
accommodates the students attending training at the Facilities as well. 
As of January 6, 2006, the S&E Plan has 3,495 participants and 
beneficiaries and $43,563,887 in plan assets.
    The Pension Plan is a multiemployer defined benefit pension plan 
funded by contributions from contributing employers pursuant to 
collective bargaining agreements. The purpose of the Pension Plan is to 
provide pension and retirement benefits, including death benefits, to 
eligible participants and their beneficiaries. The Pension Plan also 
features a money purchase pension component. As of January 6, 2006, the 
Pension Plan has 6,238 participants and beneficiaries and $515,160,000 
in plan assets.
    The Vacation Plan is a multiemployer welfare benefit plan funded by 
contributions from contributing employers pursuant to collective 
bargaining agreements. The purpose of the Vacation Plan is to provide 
paid vacation time to eligible participants. As of January 6, 2006, the 
Vacation Plan has 3,690 participants and beneficiaries and $29,464,387 
in plan assets.
    The Medical Plan is a multiemployer welfare benefit plan funded by 
contributions from contributing employers pursuant to collective 
bargaining agreements. The purpose of the Medical Plan is to provide 
medical and hospitalization benefits for participants and their 
families. As of January 6, 2006, the Medical Plan has 5,455 
participants and beneficiaries and $32,363,519 in plan assets.
    The 401(k) Plan is a multiemployer profit-sharing plan, with a cash 
or deferred arrangement, funded by contributions from participants and 
contributing employers pursuant to collective bargaining agreements. 
The purpose of the 401(k) Plan is to provide retirement benefits, 
including death benefits, to participants and their beneficiaries. As 
of January 6, 2006, the 401(k) Plan has 4,471 participants and 
beneficiaries and $157,636,687 in plan assets.

Section I Transactions

    (1) Union Transactions: The Union often schedules its meetings at 
the same time as the Trustees' meetings to minimize travel burdens and 
ease scheduling. Scheduling Union meetings during this time facilitates 
the attendance of Union-side Trustees who are already at the Facility 
to attend Trustees' meetings. The Union Transactions will only occur 
when the Union meeting at issue (a) takes place during the same days as 
scheduled Trustees' meetings, (b) takes place on a day or days 
immediately and continuously preceding the days of scheduled Trustees' 
meetings, or (c) takes place on a day or days immediately and 
continuously following the days of the scheduled Trustees' meetings.
    The AMO Plans wish to have their Trustees stay at one of the 
Facilities during the Trustees' meetings. Because the Union often 
schedules its meetings to coincide with Trustees' meetings, it would be 
unworkable or inefficient for affected Union-side Trustees to move to 
different lodging for the Union meetings. Instead, it is requested that 
the Union share in the costs of accommodating Union-side Trustees 
during multi-day meetings that include Union meetings.

    The Union Transactions will not occur with respect to Union 
meetings scheduled entirely independent of and not attendant to 
Trustees' meetings. When the Union schedules its meetings at the 
Facilities to benefit from the presence of the Trustees, it would 
only be equitable that the Union should share, where appropriate, 
the food and lodging expenses incurred during the multi-day series 
of meetings that are attributable to non-S&E Plan business.

    (2) Conference Transactions: The Joint Training Advisory Committee

[[Page 41480]]

(JTAC) and the Deep Sea Employer Conference (DSEC) are groups, which 
consist of representatives of Great Lakes contributing employers and 
Deep Sea contributing employers, respectively, and representatives of 
the Union.\11\ The Union and contributing employers, who will pay for 
their respective representatives to attend JTAC and DSEC meetings, are 
parties in interest with respect to the S&E Plan.
---------------------------------------------------------------------------

    \11\ The applicant represents that the JTAC and DSEC are not 
incorporated or otherwise organized in any legal sense and 
membership in the groups is not fixed. Rather, the JTAC and DSEC are 
the names used to describe periodic gatherings of Union 
representatives and representatives of contributing employers to 
address issues of importance to the maritime industry.
---------------------------------------------------------------------------

    The S&E Plan would like to provide food and lodging for the 
representatives of the Union and the respective contributing employers 
attending the JTAC and the DSEC meetings at the Facilities.
    The JTAC and DSEC were formed in response to the rapidly changing 
regulatory environment in the maritime industry and in response to 
chronic manpower shortages. The Union and contributing employers 
thought it would be beneficial to have periodic meetings to address new 
regulatory requirements and strategies to address the shortage of 
trained officers, among other issues pertinent to the industry. The 
JTAC and DSEC meetings primarily focus on training needs, although 
matters relating to other AMO Plans are also discussed.
    The contributing employers and the Union desire that the JTAC and 
DSEC meetings be held at the Facilities. The meetings would involve not 
only the use of meeting space, but also the use of overnight lodging 
and catering Facilities. The attendees of the JTAC and the DSEC 
meetings (or, more likely, the party on whose behalf they attend) would 
pay the S&E Plan for its costs incurred in hosting the meetings at the 
rates approved by the I/F.
    Portions of JTAC and DSEC meetings pertain to the S&E Plan and S&E 
Plan personnel generally make presentations at such meetings. Thus, it 
would be convenient for the S&E Plan personnel to hold the meetings at 
the Facilities. The S&E Plan believes it is better able to make its 
presentations to the JTAC and DSEC meetings if they are held at the 
Facilities because the S&E Plan personnel would then have access to the 
technology and training capabilities at the Facilities.
    The S&E Plan also believes that it benefits from the JTAC and DSEC 
meetings being held at the Facilities because regular communication 
with the Union and the employers on training needs and requirements 
serves one of the overall purposes of the S&E Plan, i.e., to improve 
the quality of licensed marine officers. This type of interaction 
allows the S&E Plan to remain up-to-date on its participants' training 
needs. The S&E Plan believes that hosting the JTAC and DSEC meetings is 
particularly helpful because the representatives of the contributing 
employers attending such meetings are those responsible for training, 
and are not the Trustees or labor relations staff who are more likely 
to visit the Facility on other occasions, e.g., Trustee meetings. Thus, 
the JTAC/DSEC meetings facilitate interaction between the S&E Plan and 
the representatives of the employers who are responsible for training.
    The S&E Plan is requesting exemptive relief for the Conference 
Transactions because such meetings may be beyond the scope of those 
benefits provided in accordance with the S&E Plan through contributions 
made pursuant to collective bargaining agreements, even though the 
stated purposes of the S&E Plan are quite broad. As such, in the 
interest of caution, the S&E Plan requests exemptive relief.
    The primary reason for entering into the Conference Transactions is 
that they serve the AMO Plan's primary purpose of providing training to 
participants covered by the S&E Plan. Representatives to the JTAC and 
DSEC meeting are not employer Trustees to the AMO Plans. The JTAC and 
DSEC gather periodically to address a variety of issues important to 
the maritime industry, including the training curriculum, course 
design, scheduling and budget issues.
    (3) Non-Plan Transactions: The JEC is a labor management committee 
under section 302(c)(9) of the Labor Management Relations Act. 
Employers make contributions to the JEC pursuant to the terms of 
collective bargaining agreements and the JEC performs employment 
placement services for licensed maritime officers through an 
administrative services contract with the Union. Appropriately 
qualified and licensed Union members are placed with contributing 
employers who are seeking such personnel. The committee members of the 
JEC are also Trustees of various AMO Plans. The applicant represents 
that although the JEC is not a plan, it may nevertheless be classified 
as a party in interest with respect to the S&E Plan because it may be 
considered an employee organization whose members are covered by the 
S&E Plan.
    The AMOS was formed to serve as a business league for the maritime 
industry. The JEC, and the AMOS will pay the S&E Plan for their 
proportionate share of the costs for food and lodging at the Facilities 
provided by the S&E Plan at the rates approved by the I/F. Because both 
entities share administrative services with the AMO Plans, they would 
pay the S&E Plan for their use of the Facilities based on the 
Allocation Model.
    The JEC, and the AMOS take advantage of the scheduling of the 
Trustees' meetings to hold their meetings. Thus, these meetings become 
part of the multi-day agenda associated with the Trustees' meetings. 
Structuring the meeting schedule this way saves costs and minimizes the 
travel burdens on Trustees. Because a portion of the multi-day agenda 
will be devoted to the JEC, and the AMOS meetings, it would only be 
equitable for these entities to pay the S&E Plan their proportionate 
share of the costs.
    The S&E Plan wishes to enter into the Transactions because of the 
efficiencies offered by consolidating the meetings and because it 
believes that holding such meetings at the Facilities benefits the S&E 
Plan overall by improving communication and interaction with these 
entities in ways that are helpful to the S&E Plan.

Section II Transactions

    (1) Trustee Transactions: The Trustees of the AMO Plans may be 
parties in interest with respect to the S&E Plan for a number of 
different reasons. Those who are Trustees of the S&E Plan are parties 
in interest by reason of being fiduciaries. Others may be employees or 
officers of contributing employers or the Union.
    The AMO Plans generally hold their respective Trustees' meetings at 
the Facilities. The AMO Plans typically schedule their Trustees' 
meetings over several consecutive days. Each AMO Plan's Trustees' 
meeting has a separate agenda and separate minutes are maintained for 
each meeting. The individual Trustees, however, are usually at the 
Facilities to attend a number of different Trustees' meetings and other 
meetings.
    Each of the AMO Plans will pay the S&E Plan its share of the 
Trustees' room and board expenses based on the Allocation Model. 
Accommodating the Trustees at the Facilities during Trustees' meetings 
makes sense in light of the fact that the Trustees are at the 
Facilities for a number of days to attend a series of meetings. 
Providing food and lodging services to the Trustees at the Facilities 
maximizes the efficiency of such meetings by eliminating travel time to 
and from the meetings and by

[[Page 41481]]

encouraging and facilitating interaction among the Trustees, AMO Plans' 
participants and AMO Plans' personnel.
    Another reason for entering into the Trustee Transactions is cost 
savings. It is likely to cost the AMO Plans less to provide food and 
lodging services to Trustees at the Facilities compared to providing 
such services at nearby hotels and restaurants. The AMO Plans must 
cover the reasonable expenses incurred by their Trustees while 
attending Trustees' meetings in any event. Thus, minimizing these 
expenses would be beneficial to the AMO Plans and their participants.
    The AMO Plans believe that holding Trustees' meetings is necessary 
for the administration and operation of the AMO Plans, and that 
providing food and lodging for Trustees would appear to be a 
concomitant part therefore. It is not clear, however, whether the 
provision of lodging and food is the type of service that fits within 
any statutory or class exemptions.
    The I/F will decide whether it is appropriate for an AMO Plan to 
enter into a Trustee Transaction with the S&E Plan for the Trustees' 
food and lodging. The Allocation Model will ensure that each AMO Plan 
pays its respective share of the expenses.
    (2) Professionals' Transactions: Professionals providing services 
to the AMO Plans, such as attorneys, and accountants often need to 
visit the Facilities to attend to the business of one or more of the 
AMO Plans. The Allocation Model will ensure that each AMO Plan shares 
the appropriate expenses such professionals incur in visiting the 
Facility as an administrative expense of the respective AMO Plans. The 
respective AMO Plans, the JEC, and the AMOS would reimburse the S&E 
Plan for their proportionate share of the costs incurred in 
accommodating the visiting plan professionals at the rates approved by 
the I/F. The reimbursement would be made through the Allocation Model.
    The AMO Plans believe that there is an advantage to having plan 
professionals stay and dine at the Facilities so that there are more 
opportunities for interaction between the professionals and the 
relevant Trustees, personnel and participants.

Section III Transactions

    (1) Specially Scheduled Training: Contributing employers may need 
to contract with the S&E Plan to provide one of its regular courses at 
a special time. This need may arise when special circumstances, such as 
a shipping schedule, prevent the employees of a particular employer 
from attending one of the regularly scheduled training courses. The S&E 
Plan requests exemptive relief to contract with contributing employers 
to provide regular courses at special times to accommodate the 
employers' scheduling demands.
    (2) Specially-Designed Training: A contributing employer may wish 
the S&E Plan to design training programs or undertake special research 
or modeling that is tailored to the needs of that particular employer 
or its vessels. In these circumstances, contributing employers will 
need to contract with the S&E Plan to develop special training programs 
or conduct specially designed research or modeling to meet their 
particular needs. The S&E Plan requests exemptive relief to provide 
such services tailored to the special needs of a particular 
contributing employer or its vessels.
    The S&E Plan wishes to enter into the special training transactions 
to meet the needs of participants in a way that is fair to all 
employers without requiring the renegotiation of the collective 
bargaining agreements.
    In addition, coordinating with employers to develop specially 
designed training and research programs benefits the purposes of the 
S&E Plan by developing and executing programs to improve the overall 
quality of maritime officers. Once special courses are designed, the 
materials from such courses are available to all participants in the 
S&E Plan and to all S&E Plan instructors. The S&E Plan believes that 
entering into these contracts with the contributing employers improves 
the quality of the instruction provided by the S&E Plan by expanding 
the knowledge and expertise of the S&E Plan instructors and expanding 
the training curriculum.
    For both Specially Scheduled Training and Specially-Designed 
Training, the contributing employer would pay the S&E Plan directly for 
(1) the specially scheduled training, and (2) the specially designed 
training, research, and modeling. The individual employer would be 
responsible for paying the S&E Plan for such services in order to avoid 
the inequity of burdening all contributing employers with the 
additional costs of the S&E Plan's efforts to meet the needs of an 
individual contributing employer. Payment amounts would be at the rates 
approved by the I/F.
    The Allocation Model: The costs of the Trustee Transactions and the 
Professionals' Transactions are allocated to the AMO Plans, the 
Maritime Building Realty Holding Trust (the MBRHT), the AMOS, and the 
JEC (the MBRHT, AMOS, and the JEC are collectively referred to as other 
entities (Other Entities)) based on the number of AMO Plans and Other 
Entities that each Trustee represents. For example, where a Trustee 
represents four AMO Plans and one Other Entity, one fifth of the costs 
attributed to that Trustee will be allocated to each AMO Plan or Other 
Entity.
    The direct attendance expenses attributable to the Trustee meetings 
for each Trustee are allocated among the AMO Plans that the Trustee 
represents. Direct attendance expenses include the cost of items like 
travel, meals, and lodging. Those direct attendance expenses for meals 
and lodging that are not attributable to the Trustee meetings are 
deducted before the allocation. Non-attributable billable expenses are 
billed directly to AMO Plan professionals, Trustees and the Union as 
required by the AMO Plans Policy and Guidelines on Trustee Expense 
Reimbursement and are not allocated among the AMO Plans and Other 
Entities. Such costs arise when individuals arrive early or extend 
their stays beyond the dates of the Trustee meetings in order to attend 
a Union meeting.
    The percentage of the total direct attendance expenses allocated to 
each AMO Plan or Other Entity is used as the basis for allocating the 
indirect attendance expenses. The indirect attendance expenses are the 
costs incurred by the AMO Plans' staff, counsel, and accountants and 
other expenses related to hosting the meeting. Again, non-attributable 
billable expenses, as described above, are not allocated among the AMO 
Plans and Other Entities.
    Finally, the direct attendance expenses of AMO Plans' professionals 
and AMOS employees who are only attending meetings of specific AMO 
Plans are allocated among those AMO Plans based on the number of 
meetings that each individual is attending. Then the direct and 
indirect attendance expenses allocated to each AMO Plan are totaled.
    Internal Plans Policy and Procedure: The AMO Plans have set up a 
series of systems, policies and procedures to internally track and 
audit use of the lodging and the Facilities and related services. These 
include the STAR Center Registrar (the Registrar), RM Software and the 
AMO Plans' Accounting Department (the Accounting Department). In order 
to maximize the effectiveness, security and accuracy of these systems, 
the Registrar is completely independent of RM Software. The Accounting 
Department, nonetheless, receives the records of both

[[Page 41482]]

for internal auditing purposes and compares these records to its own 
accounting records. In addition, the Accounting Department reviews 
records for consistency with the purposes of the Facilities, the S&E 
Plan and the STAR Center in mind.
    More specifically, RM Software creates an invoice for lodging and 
food service accounting functions and related services at the 
Facilities, while the Registrar creates a record of curriculum, 
attendance and certifications. Records from both systems are turned 
over to Accounting for review, audit, billing, receiving, and 
resolution of discrepancies. These records serve as the basis for the 
allocation of expenses among the AMO Plans.
    Records from all three sources are subject to audit by the external 
auditor and review and analysis by the I/F. When the I/F begins full 
operation the entire system will be subject to its review and, if 
required, adjustments will be made in response to its recommendations. 
The I/F and external auditor will also use these records to review and 
verify the accuracy of the allocation of expenses to each AMO Plan.
    The Registrar: All AMO Plan participants interested in 
participating in training programs are required to contact the Star 
Center to register for specific classes. The Registrar maintains 
training records for all S&E Plan participants so that training history 
and requirements are easily retrievable. AMO Plan participants are 
registered for specific training programs on specific dates. The 
Registrar enables the Star Center to identify particular training 
requirements for individuals, ensure that the appropriate level of 
training is provided, and prevents unnecessary repetition of training 
programs. Course schedules, registration and attendance are also 
maintained at this level. Thus, the Registrar documents class 
attendance, exam results, training upgrades for the Coast Guard, and 
the required ratings and certifications.
    Room Master: RM Software, a hotel software system, is used for 
lodging and food service accounting functions and related services. 
Room Master provides the reservation system for guest rooms, 
classrooms, and meeting rooms. It also tracks demand for housekeeping, 
dining, and other related services. Currently, AMO Plan participants 
attending training programs at the Star Center receive a room 
reservation through Room Master once their registration by the STAR 
Center Registrar is confirmed. Training participants also are given a 
welcome package that provides classroom information for their assigned 
course, and rules and regulations while on campus.
    If this exemptive relief is provided, the use of RM Software will 
be expanded to provide the same reservation, recordkeeping, and 
reconciliation services for Trustees, Union representatives, AMO Plan 
professionals, non-plan entities, contributing employers and others 
whose use of the Facilities would serve the overall purposes of the AMO 
Plan. For example, RM Software would provide room reservations to 
Trustees, professionals or others attending meetings at the facility. 
Meeting and training rooms and food services also would be reserved 
through Room Master. In addition, Room Master would confirm the 
appropriateness of all lodging and food services arrangements with 
established meeting schedules and membership lists. Room Master records 
also provide daily occupancy information that can be compared to galley 
inventory and meal services to ensure consistency.
    Upon arrival, the identification of each guest is verified and each 
guest is issued a photo ID, which must be worn at all times while at 
the Facilities. Guests are also provided with an electronic key to 
access perimeter gates and their guest rooms. Keys are only activated 
for the scheduled stay and automatically deactivate on the date of 
scheduled departure.
    The Room Master system combined with the use of photo IDs and 
electronic keys helps to ensure that all guests are provided with only 
the accommodations and services appropriate for the designated and 
independently confirmed purpose of their visit.
    Accounting Department: The Accounting Department is required to 
audit the use of the Facilities' lodging, food and related services 
against course registrations, contracts, billings and receipts, and the 
purpose of services provided. Any discrepancies are resolved promptly. 
For example, when the STAR Center finalizes an approved contract, the 
contract is turned over to Accounting. This contract is reviewed 
against Room Master for lodging information and against the Registrar 
to verify attendance at classes. The Accounting Department receives the 
lodging record of all guests on a daily basis and reviews these records 
against the Registrar System to identify and record the purpose of each 
guest's stay. The Accounting Department also reconciles lodging and 
attendance records with meal services provided to identify and remedy 
potential inconsistencies.
    These systems will produce multiple and auditable records of the 
Facilities use. For example, with such systems in place, a Trustee's 
attendance at a Trustee meeting would generate a reviewable paper trail 
that begins with the Trustee's response to the notice of a Trustee 
meeting sent out by the Office of the Executive Director of the AMO 
Plans, which maintains a calendar of all scheduled Trustee meetings. 
The Trustees' response to the meeting notice would be entered into Room 
Master, documenting the response and setting up a reservation for the 
duration of the meeting.
    When the Trustee arrives the Trustee would check in, receive an ID 
and a key that is activated for only the duration of the meeting. The 
Trustee's attendance at each meeting would be recorded. When the 
meeting is over, the Room Master record, containing all accrued 
expenses, and attendance records would be sent to the Accounting 
Department. The Accounting Department would review individual records 
for internal consistency and aggregated records for consistency with 
food, housekeeping and other expenses. The Accounting Department would 
also apply the allocation model so that business expenses could be 
distributed appropriately among the AMO Plans that the attending 
Trustee represents. The package of records, allocations, and analysis 
compiled by the Accounting Department then can be audited.
    The I/F: To ensure that the interests of the AMO Plans and their 
participants are well protected, the AMO Plans have retained American 
Realty Advisors as the I/F with respect to the Transactions.\12\ The I/
F has extensive experience advising ERISA plans on the management of 
their real estate assets. The I/F will review each of the proposed uses 
of the Facilities and make determinations whether such uses are 
prudent, appropriate and in the best interest of the AMO Plans and 
their participants. The I/F will also have responsibility for 
monitoring the use of the Facilities to ensure that the Transactions 
never displace S&E Plan participants who wish to attend training at the 
Facilities.
---------------------------------------------------------------------------

    \12\ If it becomes necessary in the future to appoint a 
successor independent fiduciary (the Successor) to replace American 
Realty Advisors, the applicant will notify the Department sixty (60) 
days in advance of the appointment of the Successor. Any Successor 
will have the responsibilities, experience and independence similar 
to those of American Realty Advisors.
---------------------------------------------------------------------------

    The I/F will establish or approve reasonable terms and conditions 
for the Transactions, including the price to be charged and the 
Facilities being

[[Page 41483]]

provided in the Transactions. The I/F will ensure that the Transactions 
are fair to all of the AMO Plans involved. The I/F will also develop 
guidelines pursuant to which the AMO Plans' personnel will carry out 
the approved Transactions.
    The I/F will also have an on-going monitoring role, including 
periodic reviews of the Transactions to ensure compliance with the I/F 
policies and the terms of any exemption issued by the Department. The 
I/F will review all uses of the Facility on a periodic basis to 
determine whether the use thereof remains in the interests of the AMO 
Plans and their participants and whether the terms of the Transactions, 
including the amount charged for the Facilities provided, continue to 
be appropriate. The I/F will also prepare an annual report, summarizing 
the Transactions for that year.
    The duties of the I/F will include the verification and monitoring 
of lodging and the Facilities use on a quarterly basis. It also will 
include review and analysis of the system used to allocate expenses 
among the AMO Plans as well as the actual allocations. American Realty 
also will develop and implement recommended policies and procedures for 
engaging in the transactions covered by the requested exemption. They 
will define precise requirements for staying at the facility, class 
attendance, use of the simulators, and other related activities.
    In addition, American Realty will monitor the covered transactions 
on an on-going basis to verify compliance with the policies and 
procedures that they have developed and the terms of the prohibited 
transaction exemption. As part of its duties as I/F, American Realty 
also will develop policies and procedures to ensure that its 
recommendations are carried out.
    The I/F role will ensure that the Transactions proposed herein 
remain in the AMO Plans' and participants' interest and are consistent 
with the conditions of the proposed exemption.
    In addition, the AMO Plans have retained Bond Beebe C.P.A. (Bond 
Beebe) as outside auditors to perform the annual audit of all AMO 
Plans. Bond Beebe currently audits the S&E Plan including the use of 
lodging and the Facilities. They also identify and reconcile any 
discrepancies between the Registrar, Room Master and Accounting 
Department records. In addition, Bond Beebe will provide an annual 
evaluation of all allocation models and produce approval letters 
explicitly affirming that the models are satisfactory.
    The responsibilities of the independent auditor will be expanded 
based on input from and the policies and procedures developed by the I/
F. The costs associated with recordkeeping and all forms of independent 
oversight including the I/F will be allocated equally among the parties 
participating in each respective transaction.
    In summary, the applicant represents that the proposed transactions 
satisfy the statutory criteria for an exemption under section 408(a) of 
the Act for the following reasons: (a) Each AMO Plan will pay its 
appropriate share of expenses based on the Allocation Model; (b) The I/
F retained by the AMO Plans will: (1) Make a determination of whether 
the proposed the Transaction(s) are prudent and in the best interest of 
the relevant AMO Plan(s); (2) Establish the terms for each of the 
Transactions, including: (i) The price to be charged for the services 
provided pursuant to the Transactions; and (ii) Ensuring that the 
Transactions are fair to the involved AMO Plans; (3) Develop policies 
and guidelines for the implementation of the Transactions; (4) Monitor 
the Transactions on an on-going basis, including periodic reviews of 
the Transactions, to ensure compliance with the I/F policies and 
guidelines; (5) On a periodic basis, review the terms of each of the 
Transactions, including the fair market value of the services provided; 
and (6) Prepare an annual report, summarizing the Transactions for that 
year; (c) The costs associated with recordkeeping and all forms of 
independent oversight will be included in the daily rate established by 
the I/F for food and lodging provided by the S&E Plan at the 
Facilities; (d) An independent auditor will perform annual audits of 
all the AMO Plans to identify and reconcile any discrepancies regarding 
the recordkeeping involving the Transactions and provide an annual 
evaluation of all allocation models and produce approval letters 
explicitly affirming that the models are satisfactory; and (e) RM 
Software will create an invoice for lodging and food service accounting 
functions and related services at the Facilities.

Notice to Interested Persons

    Notice of the proposed exemption shall be given to all interested 
persons in the manner agreed upon by the applicant and Department 
within 15 days of the date of publication in the Federal Register. 
Comments and requests for a hearing are due forty-five (45) days after 
publication of the notice in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department, 
telephone (202) 693-8562. (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 of the Act and/or the 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, 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) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
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
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 14th day of July, 2006.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, Department Of Labor.
[FR Doc. E6-11548 Filed 7-20-06; 8:45 am]

BILLING CODE 4510-29-P