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Employee Benefits Security Administration

EBSA Federal Register Notice

[Prohibited Transaction Exemption 2007-06; Exemption Application Nos. D-11383, L-11384, D-11385, D-11383, L-11384, D-11385, L-11302 and L- 11303] [04/30/2007]

[PDF Version]

Volume 72, Number 82, Page 21299-21301

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2007-06; Exemption Application Nos. 
D-11383, L-11384, D-11385, D-11383, L-11384, D-11385, L-11302 and L-
11303]

 
Grant of Individual Exemptions Involving; Kern County Electrical 
Pension Trust (the Pension Plan), Kern County Electrical Joint 
Apprenticeship and Training Trust (the Apprenticeship Plan), Kern 
County Electrical Health and Welfare Plan (the Welfare Plan), The 
International Brotherhood of Electrical Workers Local Union 428 (the 
Local Union), OPET Health Care and Life Insurance Plans RM3A and RM5A 
(Together, the HYL Plans), and OPET Prescription Drug Plan RRx (Plan 
RRx; All Three Together, the Plans)

AGENCY: Employee Benefits Security Administration, Labor.

[[Page 21300]]


ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code).
    A notice was published in the Federal Register of the pendency 
before the Department of a proposal to grant such exemption. The notice 
set forth a summary of facts and representations contained in the 
application for exemption and referred interested persons to the 
application for a complete statement of the facts and representations. 
The application has been available for public inspection at the 
Department in Washington, DC. The notice also invited interested 
persons to submit comments on the requested exemption to the 
Department. In addition the notice stated that any interested person 
might submit a written request that a public hearing be held (where 
appropriate). The applicant has represented that it has complied with 
the requirements of the notification to interested persons. No requests 
for a hearing were received by the Department. Public comments were 
received by the Department as described in the granted exemption.
    The notice of proposed exemption was issued and the exemption is 
being granted solely by the Department because, effective December 31, 
1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 
(1996), transferred the authority of the Secretary of the Treasury to 
issue exemptions of the type proposed to the Secretary of Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (a) The exemption is administratively feasible;
    (b) The exemption is in the interests of the plan and its 
participants and beneficiaries; and
    (c) The exemption is protective of the rights of the participants 
and beneficiaries of the plan.

Kern County Electrical Pension Trust (the Pension Plan); Kern County 
Electrical Joint Apprenticeship and Training Trust (the Apprenticeship 
Plan); Kern County Electrical Health and Welfare Plan (the Welfare 
Plan) \1\ and The International Brotherhood of Electrical Workers Local 
Union 428 (the Local Union) Located in Bakersfield, California

[Prohibited Transaction Nos. 2007-06; Exemption Application Nos. D-
11383; L-11384; and D-11385]

Exemption

Section I: Transactions
    (a) The restrictions of sections 406(a)(1)(A) through (D), 
406(b)(1), and 406(b)(2) of the Act and the sanctions resulting from 
the application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) through (E) \2\ shall not apply to the sale by the 
Pension Plan of a parcel of unimproved real property (Parcel 
1) to the Local Union, a party in interest with respect to the 
Pension Plan; provided that the conditions in section 
II(a),(d),(f),(h),and (i), as set forth below, are satisfied;
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    \1\ The Apprenticeship Plan, the Pension Plan, and the Welfare 
Plan are, herein, collectively referred to as the Plans.
    \2\ For purposes of this exemption, references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
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    (b) The restrictions of sections 406(a)(1)(A) through (D), 
406(b)(1), and 406(b)(2) of the Act and the sanctions resulting from 
the application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) through (E) shall not apply to the sale to the 
Apprenticeship Plan by the Pension Plan of a parcel of unimproved real 
property (Parcel 2) which is adjacent to Parcel 1; 
provided that the conditions in section II(b),(c),(e),(g),(h),(i), and 
(j), as set forth below, are satisfied; and
    (c) The restrictions of sections 406(a)(1)(A) through (D), 
406(b)(1), and 406(b)(2) of the Act and the sanctions resulting from 
the application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) through (E) of the Act shall not apply to the lease (the 
Lease) by the Apprenticeship Plan of office space (the Premises) in a 
training facility (the Training Center) to be constructed by the 
Apprenticeship Plan on (Parcel 2) to Construction Benefits 
Administration, Inc. (CBA), a party in interest with respect to the 
Plans, as service provider, whose directors are also trustees of the 
Plans and officers of the Local Union; provided that the conditions in 
section II(i),(k), (l),(m),(n), and (o), as set forth below, are 
satisfied.
Section II: Conditions
    The relief, herein, is conditioned upon the adherence to the 
material facts and representations set forth in the application files 
and upon compliance with the conditions, as set forth in this 
exemption.
    (a) The sale by the Pension Plan of Parcel 1 to the Local 
Union is a one-time transaction for cash;
    (b) The sale by the Pension Plan of Parcel 2 to the 
Apprenticeship Plan is a one-time transaction for cash;
    (c) An independent, qualified fiduciary (the I/F), acting on behalf 
of the Apprenticeship Plan:
    (1) After negotiating, reviewing, and analyzing the terms of the 
purchase of Parcel 2, approves such purchase by the 
Apprenticeship Plan;
    (2) After negotiating, reviewing, and analyzing the construction of 
the Training Center on Parcel 2, approves the construction of 
the Training Center by the Apprenticeship Plan;
    (3) Determines that the acquisition of Parcel 2 and the 
construction of the Training Center by the Apprenticeship Plan would be 
feasible, in the interest of, and protective of the Apprenticeship Plan 
and its participants and beneficiaries; and
    (4) Is responsible for monitoring compliance with the terms and 
condition of this exemption and the terms and conditions of the 
acquisition of Parcel 2 and the construction of the Training 
Center by the Apprenticeship Plan;
    (d) The purchase price paid by the Local Union for Parcel 
1 is equal to the fair market value of such parcel, as 
determined by an independent, qualified appraiser, as of the date of 
the sale;
    (e) The purchase price paid by the Apprenticeship Plan for Parcel 
2 is equal to the fair market value of such parcel, as 
determined by an independent, qualified appraiser, as of the date of 
the sale;
    (f) The terms of the sale by the Pension Plan of Parcel 1 
to the Local Union are no less favorable to the Pension Plan than terms 
negotiated under similar circumstances at arm's length with unrelated 
third parties;
    (g) The terms of the sale by the Pension Plan of Parcel 2 
to the Apprenticeship Plan are no less favorable to the Pension Plan 
and no less favorable to the Apprenticeship Plan than terms negotiated 
under similar circumstances at arm's length with unrelated third 
parties;
    (h) The Plans will not provide any construction financing or 
permanent financing to the Local Union in

[[Page 21301]]

connection with the acquisition by the Local Union of Parcel 1 
and the construction of a building on Parcel 1 (the Union 
Building) by the Local Union, nor will the Pension Plan, the Welfare 
Plan, or the Local Union provide any construction financing or 
permanent financing to the Apprenticeship Plan in connection with the 
acquisition by the Apprenticeship Plan of Parcel 2 and the 
construction of the Training Center on Parcel 2 by the 
Apprenticeship Plan;
    (i) The Plans will not pay any commissions, fees, or other similar 
payments to any party in connection with any of the subject 
transactions;
    (j) The terms of any loan from an unrelated third party obtained by 
the Apprenticeship Plan for the purpose of acquiring Parcel 2 
or constructing the Training Center provides recourse to such unrelated 
third party lender only against the Apprenticeship Plan's interest in 
Parcel 2 and not against the general assets of the 
Apprenticeship Plan;
    (k) Prior to entering into the Lease, the I/F, acting on behalf of 
the Apprenticeship Plan, determines that the leasing transaction is 
feasible, in the interest of, and protective of the Apprenticeship Plan 
and its participants and beneficiaries; and approves the leasing 
transaction in accordance with the fiduciary provisions of the Act;
    (l) Throughout the duration of the Lease, the I/F, acting on behalf 
of the Apprenticeship Plan, monitors compliance with the terms and 
conditions of the Lease, ensures that such terms and conditions are at 
all times satisfied, and is responsible for legally enforcing the 
payment of the rent and the proper performance by CBA under the terms 
of the Lease and for taking any and all steps necessary to ensure that 
the Apprenticeship Plan is protected, including but not limited to 
reviewing, negotiating, and approving the initial Lease and any 
amendment, renewal, or extension of such Lease;
    (m) Under the provisions of the Lease, the leasing transaction is 
at all times on terms that are at least as favorable to the 
Apprenticeship Plan and to CBA, as terms that would have been 
negotiated under similar circumstances at arm's length with unrelated 
third parties;
    (n) The rental rate under the terms of the initial Lease and under 
the terms of any amendment, renewal, or extension of the Lease, is 
adjusted at least every three (3) years in which such Lease is in 
effect, and the rental rate reflects the fair market rental value of 
the Premises, as determined by an independent, qualified appraiser; and
    (o) Notwithstanding anything to the contrary in the Lease, the 
Apprenticeship Plan may at any time upon ninety (90) days prior written 
notice given to CBA, terminate the Lease and CBA's occupancy of the 
Premises, effective as of the date specified in such written notice, 
which date shall be at least ninety (90) days after the date such 
written notice is given to CBA.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the Notice of Proposed Exemption published on February 19, 2007, at 72 
Federal Register 6760.

FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the 
Department, telephone (202) 693-8540 (This is not a toll-free number).

OPET Health Care and Life Insurance Plans RM3A and RM5A (together, the 
H&L Plans); and OPET Prescription Drug Plan RRX (Plan RRX; All Three 
Together, the Plans) Located in Portland, Oregon

[Prohibited Transaction Exemption 2007-07; Exemption Application Nos. 
L-11302 and L-11303]

Exemption

    The restrictions of section 406(a) of the Act shall not apply to 
the purchase by the Plans' participants and beneficiaries of 
prescription drugs from the Labor Center Pharmacy (LCP), a party in 
interest with respect to the Plans, provided the following conditions 
are satisfied:
    (a) The terms of the transactions are at least as favorable to the 
Plans as those the Plans could obtain in similar transactions with an 
unrelated party;
    (b) Any decisions by the Plans to enter into agreements governing 
the subject purchases have been and will be made by Plan fiduciaries 
independent of LCP;
    (c) At least 50% of the preferred providers participating in the 
Preferred Provider Network (PPN) involving LCP are unrelated to LCP or 
any other party in interest with respect to the Plans;
    (d) LCP will be treated no differently than any other pharmacy 
participating in the PPN (e.g., subject to the same reimbursement rates 
and oversight as the other participating pharmacies); and
    (e) The transactions are not part of an agreement, arrangement or 
understanding designed to benefit LCP or any other party in interest 
with respect to the Plans.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on February 13, 2007 at 72 
FR 6766.

DATES: Effective Date: This exemption is effective as of January 1, 
2001.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 693-8546. (This is not a toll-free number).
General Information
    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the exemption does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) This exemption is supplemental to and not in derogation of, any 
other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the transaction is in fact a 
prohibited transaction; and
    (3) The availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 25th day of April, 2007.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. E7-8183 Filed 4-27-07; 8:45 am]

BILLING CODE 4510-29-P