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Employee Benefits Security Administration

EBSA Federal Register Notice

Notice of Proposed Exemptions [06/01/2007]

[PDF Version]

Volume 72, Number 105, Page 30632-30639

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application Nos. D-11340, Hawaii Emergency Physicians Associated, Inc. 
Profit Sharing Plan; D-11369, The Swedish Health Services Pension Plan 
(the Plan); L-11382, Sheet Metal Workers Local Union 17 Insurance Fund 
(the Fund); and D-11393 and D-11394, Paul Niednagel IRAs and Lynne 
Niednagel IRAs (collectively, the IRAs), et al.]

 
Notice of Proposed Exemptions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemptions.

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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 (ERISA or 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. 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

[[Page 30633]]

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.

Hawaii Emergency Physicians Associated, Inc. Profit Sharing Plan (the 
Plan)

Located in Kailua, Hawaii

 [Application No. D-11340]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act 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 
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 the Sale (the Sale) by the 
Plan to 407 Partners LLC (the LLC), a limited liability corporation, 
and a party in interest to the Plan, of a parcel of improved real 
property (the Property) located in Kailua, Hawaii. This proposed 
exemption is conditioned upon the adherence to the material facts and 
representations described herein and upon the satisfaction of the 
following requirements:
    (a) All terms and conditions of the Sale are at least as favorable 
to the Plan as those which the Plan could obtain in an arm's-length 
transaction with an unrelated party;
    (b) The fair market value of the Property has been determined by a 
qualified, independent appraiser;
    (c) The Sale is a one-time transaction for cash;
    (d) The Plan does not pay any commissions, costs or other expenses 
in connection with the Sale; and
    (e) The Plan will receive an amount equal to the greater of: (i) 
$3,250,000; or (ii) The current fair market value of the Property, as 
established by a qualified independent, appraiser at the time of the 
Sale.
Summary of Facts and Representations
    Hawaii Emergency Physicians Associated, Inc. (the Company), a 
Hawaii corporation, is the sponsor of the Plan. The Company is a 
medical practice engaged in providing emergency medical care services 
in hospitals throughout Hawaii. The Company employs 42 individuals and 
sponsors no employee benefit plans other than the Plan.
    The Plan is a profit sharing plan which, as of December 31, 2005, 
had participants and beneficiaries totaling 52. The administrator of 
the Plan is a retirement committee (the Committee) comprised of 
employees of the Company. As of December 31, 2005, the Plan's assets 
had an aggregate fair market value of $20,439,461.67.
    All of the assets of the Plan are held in the Hawaii Emergency 
Physicians Associated, Inc. Profit Sharing Plan Trust (the Trust) for 
which the Bank of Hawaii serves as the trustee (the Trustee). The 
assets of the Plan held in the Trust consist of various securities and 
real property.
    The Plan's real property holdings in the Trust include the Property 
which consists of a parcel of real estate located at 402 Uluniu Street, 
Kailua, Hawaii 96734. The Property was acquired from an unrelated party 
on June 8, 1989. The Property has an estimated value of $3,250,000 as 
of October 25, 2005 and constitutes approximately 15% of the total 
value of Plan assets as of October 25, 2005.
    The Property consists of a tract of approximately 13,124 square 
feet of land which is improved by a three story office and apartment 
building with 14,962 square feet of gross space and surface parking 
with 16 stalls. No party in interest has ever used or leased all or any 
portion of the Property. The Plan originally acquired the Property at a 
total cost of $1,500,000 from an unrelated third party. The Property is 
also in close proximity to four parcels of property owned by partners 
of the LLC.
    The Property was appraised on October 25, 2005, by Sanford D. Goto, 
Inc., a Certified Real Estate Appraiser (the Appraiser). The Appraiser 
has been engaged in real estate appraisal and consulting services since 
1983. The Appraiser is independent of the Company and is located in 
Honolulu, Hawaii. The Appraiser determined the value of the Property by 
utilizing three approaches: The cost approach, the market data 
approach, and the income approach. The values determined under each 
approach were utilized to establish a final assessed value of 
$3,250,000 as of October 25, 2005. A subsequent appraisal was performed 
by Harlin Young, an independent, certified real estate appraiser since 
1971, on December 10, 2005 reflecting a value of $3,200,000 for the 
Property. The LLC, however, agreed to accept the greater value of 
$3,250,000 as determined by the October 25, 2005 appraisal as the basis 
for the sales price of this proposed exemption. Mr. Young represents 
that notwithstanding the existence of the four nearby parcels owned by 
the partners of the LLC, the value of the Property is not affected by 
the proximity of the LLC partner's real estate holdings due to 
assemblage value.
    Pursuant to the terms of the Plan's Trust Agreement, the Committee 
has been delegated the authority to direct the investments of the Plan. 
The Committee determined that it is in the best interests of the Plan's 
participants and beneficiaries to sell the Property to the LLC, a 
limited liability corporation, the members of which include 
shareholders of the Company and participants of the Plan and 
communicated that recommendation to the Trustee, which approved the 
Sale subject to the Department's consent.
    The Committee represents that the proposed exemption is designed to 
allow the Plan, and thus its participants and beneficiaries, to receive 
maximum value for the Property. The Committee also wishes to diversify 
the investment holdings of the Plan such that the Plan's assets are 
invested in more liquid forms of investment. The Committee intends to 
use the proceeds of the sale of the Property to invest in such assets. 
The Committee represents that the sale of the Property will increase 
diversification, provide the maximum possible investment return for the 
Plan, and significantly increase the Plan's liquidity, all of which 
will significantly benefit the Plan's participants and beneficiaries.
    There are some members of the Committee that are also members of 
the LLC. However, these individuals represented a minority of the 
Committee at the time the Committee made the decision to sell the 
Property to the LLC. Further, these individuals recused themselves from 
the decision making process related to this exemption request and were 
not involved in the decision concerning the Sale. Members of the 
Committee who were not members of the LLC and who actually participated 
in the decision to sell the Property to the LLC are all physicians.
    In summary, the Applicant represents that the subject transaction 
satisfies the statutory criteria contained in section 408(a) of the Act 
and section 4975(c)(2) of the Code for the following reasons: (a) All 
terms and conditions of the Sale are at least as favorable to the Plan 
as those which the Plan could obtain in an arm's-length transaction 
with an unrelated party; (b) The fair market value of the Property has 
been

[[Page 30634]]

determined by a qualified, independent appraiser; (c) The Sale is a 
one-time transaction for cash; (d) The Plan does not pay any 
commissions, costs or other expenses in connection with the Sale; and 
(e) The Plan will receive an amount equal to the greater of: (i) 
$3,250,000; or (ii) The current fair market value of the Property, as 
established by a qualified, independent appraiser at the time of the 
Sale.

    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).

The Swedish Health Services Pension Plan (the Plan)

Located in Seattle, Washington

[Application No. D-11369]

Proposed Exemption
    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act 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, August 10, 1990). If the exemption is 
granted, the restrictions of sections 406(a)(1)(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 effective April 14, 2005, to two 
contributions in-kind (the Contribution(s)) to the Plan of securities 
(the Securities) made on April 14th and 15th 2005 by Swedish Health 
Services (the Applicant), the Plan sponsor, a party in interest with 
respect to the Plan, provided that the following conditions were met:
    (a) The Securities were valued at their fair market value at the 
time of each Contribution;
    (b) The Contributions represented no more than 20% of the total 
assets of the Plan;
    (c) The Plan has not paid any commissions, costs or other expenses 
in connection with the Contributions;
    (d) The Contributions represented a contribution in lieu of cash to 
the Plan to meet ERISA filing requirements;
    (e) The Contributions were based on publicly traded closing prices 
of the Securities on the date of the transfer; and
    (f) The terms of the Contributions between the Plan and the 
Applicant were no less favorable to the Plan than terms negotiated at 
arm's length under similar circumstances between unrelated third 
parties.
    Effective Date: This exemption, if granted, will be effective as of 
April 14, 2005.
Summary of Facts and Representations
    1. The Applicant represents that the Plan is an individually-
designed, defined benefit pension plan tax-qualified under Code Section 
401(a). The Applicant established the Plan in 1966 and has sponsored 
and maintained the Plan since then for eligible employees of the 
Applicant who meet the requirements set out in the Plan. As of December 
31, 2004, the value of the Plan's assets was $269,987,650.
    The Applicant provides hospital, medical and health care services 
and is a tax-exempt organization under Code Section 501(c)(3). The 
Applicant is the sponsor and named fiduciary of the Plan. The Applicant 
appoints members of the Swedish Health Services Employee Benefits 
Administrative Committee to carry out the general administration of the 
Plan. The Applicant represents that it makes all contributions 
necessary to fund the Plan in accordance with the Code and the Act.
    Wells Fargo NA (the Trustee) was appointed by the Applicant. 
Acquisition, diversification, disposition (for purposes of investment 
and reinvestment) and investment of the Plan's assets are the 
responsibility of the Trustee, except to the extent otherwise provided 
in the Plan's trust agreement (the Trust Agreement). The Trust 
Agreement provides that the Applicant may appoint one or more 
investment managers to have sole responsibility for investment of all 
or part of the Trust assets. The Applicant appointed investment 
managers who assembled custom-designed portfolios for investment of the 
Trust assets in accordance with the Plan's investment policy and 
guidelines. The Trust Agreement provides that the Trustee will act on 
investment instructions given to it by an investment manager and in 
doing so, the Trustee will only be an administrative agent in carrying 
out the directed investment transactions.\1\ The Trustee serves as the 
commercial bank for the Applicant in addition to serving as Trustee for 
the Plan.
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    \1\ Under ERISA section 403(a)(1), a plan may expressly provide 
that a trustee is subject to the direction of a named fiduciary who 
is not a trustee, in which case the trustee shall be subject to 
proper directions of such fiduciary which are made in accordance 
with the terms of the plan and which are not contrary to the Act. 29 
U.S.C. 1103(a)(1).
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    Investment managers (the Investment Managers) have been appointed 
to direct investment of the Plan assets pursuant to the authority 
granted in the Plan and the Trust. Among the Investment Managers are 
Sanford Bernstein & Associates (Bernstein), Batterymarch Financial 
Management, Fred Alger Management, Inc., American Funds (EuroPacific) 
and PIMCO. The Investment Managers assembled custom-designed portfolios 
for investment of the Plan assets in accordance with the Plan's 
investment policy and guidelines. The Applicant's business account is 
managed by the same Investment Managers who invest the Plan assets. 
Further, the investment objectives of the Applicant's business account 
and the investment policy of the Plan are similar.
    2. The Applicant instructed the Trustee to notify the Investment 
Managers to select securities held in the Applicant's business account 
to be transferred to the Plan. By E-mail, the Trustee notified the 
Investment Managers and collected from each Investment Manager a list 
of appropriate securities held in the Applicant's business account for 
transfer to the Plan's account. Each Investment Manager was allocated a 
percentage of the total Plan assets for management (Target Asset 
Allocation Percentage). To maintain the Plan assets under management by 
each Investment Manager after the contribution at or near the 
Investment Manger's Target Asset Allocation Percentage, the dollar 
amount of securities to be selected by the Investment Manager was 
specified by the Applicant. For example, Bernstein's target asset 
allocation was 14.5%. To maintain Bernstein's asset allocation 
percentage at approximately 14.5% after the contribution, it was 
necessary for Bernstein to identify securities valued at approximately 
$3.5 million to be transferred to the Plan.
    On April 14 and April 15, 2005 contributions were made to the Plan 
on behalf of the Applicant. The total value of the amounts contributed 
was slightly less than $30,000,000. The Applicant states that these 
amounts were contributed to the Plan to bring the Plan's funding level 
above minimum filing requirements under section 4010 of ERISA. Of this 
amount approximately $14 million constituted the Contributions and the 
balance was contributed in cash. The Trustee transferred the Securities 
selected by the Investment Managers from the Applicant's business 
account to the Plan

[[Page 30635]]

account and confirmed the transfer with the Applicant verbally. 
According to the Trustee, the market value of the Securities credited 
to the Plan account was based on the closing price of each security on 
the date of transfer based on public pricing reports.
    At no time did the Trustee inform the Applicant that the 
Contributions were not in compliance with the Code or the Act or 
otherwise take any action to prevent the prohibited transactions from 
occurring. The Applicant represents that Trustee administration 
continued as usual until the prohibited transaction was discovered by 
the Applicant. The Applicant became aware that the Contributions were a 
prohibited transaction on or about July 18, 2005, when the Applicant's 
ERISA counsel reviewed the Plan statements and informed the Applicant 
that the Contributions were prohibited.\2\
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    \2\ The Department wishes to note that ERISA's general standards 
of fiduciary conduct would apply to the Contribution. In this 
regard, section 404(a) of the Act requires, among other things, that 
a plan fiduciary discharge his duties with respect to a plan solely 
in the interest of the plan's participants and beneficiaries in a 
prudent fashion.
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    3. As soon as the Applicant became aware of the prohibited 
transaction, the Applicant represents that it proceeded to take 
appropriate action. The Applicant contacted the Department and filed an 
application for exemptive relief. Furthermore, the Applicant reviewed 
the business and Plan account statements, verified that the Securities 
were transferred from the Applicant's business account to the Plan 
account, and evaluated the scope of the prohibited transaction. In 
addition, the Applicant compiled a report of the then current value of 
each Security and concluded that the Securities had increased in value 
by $1,403,110 from the Contribution date to September 30, 2005. The 
Applicant represents that because of the favorable performance of the 
Securities and the Investment Managers' instructions to retain the same 
asset allocation in the Plan, the Applicant did not direct a sale of 
the Securities at that time.
    The Contributions consisted of approximately 100 different 
Securities, including mutual fund shares. The Securities have a readily 
ascertainable fair market value and are publicly traded on an 
established market or are mutual fund shares, which are valued daily. 
The Trustee credited to the Plan's account the fair market value of the 
Securities as of the Contribution dates, and the Plan's actuaries 
credited to the Plan's funding standard account the fair market value 
of the Securities reported on the Plan account statements provided by 
the Trustee.
    4. The Applicant was unaware that the Contributions were prohibited 
under the Act. The Trustee implemented the Contributions without 
objection or comment and did not inform the Applicant of the existence 
of a prohibited transaction. The Applicant represents that in the 
future, all transactions that may involve fiduciary self dealing, and 
in particular, potential prohibited transactions will be submitted to 
ERISA counsel for review and approval, prior to entering into such 
transaction. Additionally, the Applicant has undertaken a program 
conducted by ERISA counsel, involving internal training sessions for 
fiduciary self dealing issues as well as possible prohibited 
transaction situations.
    5. The Applicant represents that the proposed exemption is in the 
interests of the Plan and its participants and beneficiaries because it 
allows the Plan's assets to continue to be invested in accordance with 
the investment objectives of the Investment Managers, without 
undertaking unnecessary, costly and administratively burdensome 
transactions. By transferring the Securities directly to the Plan, the 
Plan's investment objectives were achieved without the Plan incurring 
transaction costs that the Plan otherwise would have incurred to 
purchase the Securities.
    The Applicant represents that the proposed exemption is protective 
of the rights of Plan participants and beneficiaries because the 
Contributions were based on publicly traded closing price of each 
Security on the date of transfer. Further the Plan paid no commissions, 
costs, or other expenses with respect to the Contributions.
    6. In summary, the Applicant represents that the proposed exemption 
satisfies the statutory criteria because: (a) The Securities were 
valued at their fair market value at the time of each Contribution; (b) 
The Contributions represented no more than 20% of the total assets of 
the Plan; (c) The Plan has not paid any commissions, costs or other 
expenses in connection with the Contributions; (d) The Contributions 
represented a contribution in lieu of cash to meet ERISA filing 
requirements; (e) The Contributions were based on publicly traded 
closing prices of the Securities on the date of the transfer; and (f) 
The terms of the Contributions between the Plan and the Applicant were 
no less favorable to the Plan than terms negotiated at arm's length 
under similar circumstances between unrelated third parties.

    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 of the Notice of proposed exemption in the Federal 
Register. Comments and requests for a hearing are due forty-five 
(45) days after publication of this notice in the Federal Register.


For Further Information Contact: Khalif Ford of the Department, 
telephone (202) 693-8540 (this is not a toll-free number).

Sheet Metal Workers Local Union 17 Insurance Fund (the Fund),

Located in Boston, Massachusetts

[Exemption Application Number: L-11382]

Proposed Exemption
    The Department is considering granting an 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, 32847, 
August 10, 1990). 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 
the purchase (the Purchase) by the Fund of a business condominium unit 
(Unit No. 1) from the Sheet Metal Workers International Association 
Local 17 Building Association, Inc. (the Building Corporation), a party 
in interest with respect to the Fund, provided that the following 
conditions are satisfied:
    (a) The terms and conditions of the transaction are no less 
favorable to the Fund than those which the Fund would receive in an 
arm's length transaction with an unrelated party;
    (b) The Purchase of Unit No. 1 by the Fund is a one-time 
transaction for cash;
    (c) The Fund will not pay any sales commissions, fees, or other 
similar expenses to any party as a result of the proposed transaction;
    (d) The Fund will purchase Unit No. 1 from the Building Corporation 
for the lesser of (1) $800,000 or (2) the fair market value of the 
Property as determined on the date of the purchase by a qualified, 
independent appraiser;
    (e) The proposed transaction will be consummated only after a 
qualified, independent fiduciary, acting on behalf of the Fund, 
negotiates the relevant terms and conditions of the transaction and 
determines that proceeding with the transaction would be in the 
interest of the Fund; and
    (f) The independent fiduciary monitors the transaction on behalf of 
the Fund to ensure compliance with the agreed upon terms.

[[Page 30636]]

Summary of Facts and Representations
    1. The Fund, which is sponsored by the Sheet Metal Workers 
International Association Local Union No. 17, AFL-CIO (the Union), is 
an employee welfare benefit plan within the meaning of section 3(1) of 
the Act. The Fund has been headquartered in an office condominium owned 
by the Fund that is located at 43 Kingston Street, 5th Floor (the 
Existing Facility) in Boston, Massachusetts; the Fund has occupied this 
condominium since March of 1984. As a multiemployer trust fund 
operating in conformity with the requirements of the Labor Management 
Relations (Taft-Hartley) Act of 1947 (as amended), the Fund was 
established under an Agreement and Declaration of Trust (the Trust 
Agreement) dated May 22, 1950 between the Union and participating 
employers (with the most recent amendment and restatement of this Trust 
Agreement occurring on May 1, 1984). The Fund is designed to provide 
health benefits, life insurance, and related benefits for eligible 
participants and their dependents. The Fund presently is self-funded, 
but has an administrative services only (ASO) contract with Blue Cross 
and Blue Shield of Massachusetts, Inc. with respect to the Fund's 
provision of medical benefits. As of March 1, 2007, the Fund had 1,380 
active participants, 522 retiree participants, and 2,451 beneficiaries/
dependents. As of November 30, 2006, the Fund had total assets of 
$43,697,288.
    The Fund is established by two sponsoring organizations. The first 
is the Union, a labor organization that represents employees in the 
sheet metal industry. The second is an association of employers 
entitled the Sheet Metal and Air Conditioning Contractors National 
Association of Boston (SMACNA). The Fund is funded by contributions 
made by employers to the Fund pursuant to one or more collective 
bargaining agreements. The Fund is administered by a six member Board 
of Trustees (the Trustees) consisting of three Employer Trustees 
appointed by SMACNA and three Union Trustees named by the Union. The 
Trustees of the Fund, who have investment discretion over the assets of 
the Fund (except to the extent delegated to one or more investment 
managers), are represented by the applicant to include: Messrs. Joseph 
Cullen, Jack Desmond, and Kevin Gill, who were appointed by SMACNA; and 
Messrs. Fred Creagher, Festus Joyce, and James Wool, who were appointed 
by the Union. The Trustees employ a salaried Fund Administrator, Mr. 
Robert W. Keough, to oversee the operations of the Fund. In addition to 
the Fund Administrator, the Fund employs four other employees, all of 
whom are located in the Existing Facility and perform various 
administrative tasks for the Fund.
    2. The Fund represents that the Building Corporation, a non-profit 
corporation operating pursuant to section 501(c)(5) of the Code and 
chapter 180 of the Massachusetts General Laws, is wholly owned by the 
Union. The Building Corporation also owns the business condominium unit 
that is the subject of the proposed transaction, designated as Unit No. 
1, which consists of approximately 3,340 square feet of floor area 
occupying the ground level of a two-story office building (the 
Building). The Union currently occupies condominium Unit No. 2 of the 
Building, which serves as headquarters for the Union. The Building, 
which is located at 1157 Adams Street, Boston, Massachusetts, is 
situated on land consisting of two adjacent parcels (the Parcels) owned 
by the Building Corporation. The Parcels are contiguous to another 
parcel of land (the Adjacent Parcel) located at 1181 Adams Street in 
Boston; the Adjacent Parcel is owned by a Union-sponsored 
apprenticeship plan and contains a separate building (the Training 
Facility) designed for the training of Union members. The Union began 
construction of the Building in 2004 to provide new office space for 
the Union, and also to provide a possible new location for the Fund's 
offices. There are currently no other tenants in the Building.
    3. In 2005, the Trustees of the Fund designated a subcommittee (the 
Subcommittee) consisting exclusively of employer Trustees to examine 
the Fund's current and anticipated office space needs. The Subcommittee 
subsequently determined that the Existing Facility was inadequate for 
the needs of the Fund, and that it would be in the best interests of 
the Fund to relocate to Unit No. 1. Among other things, the 
Subcommittee reported to the Trustees that the efficient operation of 
the Fund has been adversely affected by the limited area (approximately 
1,500 square feet) of the Existing Facility, which has produced 
congested working conditions and practical obstacles to efficient 
compliance with the federal requirements pertaining to the 
confidentiality of participant and beneficiary medical information 
under the Health Insurance Portability and Accountability Act of 1996 
(HIPAA). By contrast, the Subcommittee reported that the acquisition of 
Unit No. 1 would provide a significant increase in the quality and 
quantity of Fund office and storage facilities, improved handicapped 
accessibility, on-site parking space, increased physical security, and 
greater proximity to major thoroughfares and public transportation. The 
Subcommittee also advised that the layout of Unit No. 1 would help to 
ensure the privacy of HIPAA-protected health information pertaining to 
the Fund's participants and beneficiaries. Furthermore, the 
Subcommittee reported that Unit No. 1 would provide Fund participants 
and beneficiaries with close proximity to the offices of the Union and 
the Training Facility, thus providing Union members who are also Fund 
participants with convenient ``one-stop shopping'' for Union-related 
services and benefits. After reporting these findings to the Trustees, 
the Subcommittee obtained authorization from the Trustees of the Fund 
to obtain an initial independent appraisal of Unit No. 1 to assist in 
the determination of an appropriate purchase price.
    Pursuant to this authorization, Unit No. 1 was appraised on June 
30, 2005 by the firm of Integra Realty Resources, Inc. (hereinafter 
``Integra'') of Boston, Massachusetts. Integra represents that it is a 
large property valuation and consulting firm operating throughout the 
United States, with substantial expertise in the valuation of standard 
commercial property types. The Fund represents that Integra receives 
less than one percent of its gross income from the Union. The 
Subcommittee recommended the selection of Integra to the Trustees after 
the Fund Administrator obtained favorable references from the Fund's 
attorney, the Fund's special ERISA counsel, and an outside consultant 
who monitors and reviews investment managers for the Fund. 
Specifically, the special ERISA counsel based his recommendation upon 
past dealings with Integra, its credentials as a real estate appraiser, 
and the reasonableness of the compensation charged for its appraisal 
services. The Fund represents that Integra is wholly independent of and 
unrelated to the Union and the Building Corporation. Moreover, the Fund 
represents that Integra has no ownership or financial interest in the 
Union, the Building Corporation, or the property that is the subject 
matter of the contemplated transaction. One of the Integra directors 
who conducted the appraisal, Mr. Edward K. Wadsworth, MAI, is a 
certified general real estate appraiser licensed by the Commonwealth of 
Massachusetts; Mr. Wadsworth has more than 20 years of experience in 
the valuation of commercial office buildings, industrial

[[Page 30637]]

properties, condominiums, and agricultural and conservation lands in 
the metropolitan Boston area.
    In the initial appraisal report that it issued on July 18, 2005, 
Integra determined that Unit No. 1 had a fair market value of $935,000 
as of June 20, 2005. An additional summary appraisal of Unit No. 1 was 
conducted by Integra in March of 2007. This summary appraisal report 
was issued by Integra on April 11, 2007, and valued Unit No. 1 at 
$935,000 as of March 28, 2007.
    4. On March 1, 2006, the Fund also retained Integra to represent 
the interests of the Fund as an independent fiduciary (the Independent 
Fiduciary) in connection with the proposed purchase of Unit No. 1 by 
the Fund. The selection of Integra by the Trustees to act as an 
independent fiduciary was based upon the recommendation of the 
Subcommittee, which had obtained favorable references concerning 
Integra's capacity to satisfactorily perform these services from the 
Fund's attorney and the Fund's special ERISA counsel. In its service 
contract (Agreement) with the Fund, dated March 1, 2006, the 
Independent Fiduciary was authorized to negotiate of the terms and 
conditions of the purchase and sale of Unit No. 1 on behalf of the 
Fund. In addition, the Agreement provided that, in the event an 
exemption is granted by the Department, the Independent Fiduciary would 
monitor the proposed transaction in accordance with its fiduciary 
obligations under the Act to ensure that such favorable terms are 
achieved.
    The Fund represents that Integra has past experience as an ERISA 
fiduciary, and understands its duties and responsibilities under ERISA 
in serving as an independent fiduciary for the Fund with respect to the 
proposed transaction. The lead person responsible for performing these 
fiduciary services for Integra is the aforementioned Mr. Wadsworth, who 
has extensive experience as an ERISA independent fiduciary in 
connection with evaluation and oversight of a variety of real estate 
transactions involving ERISA-covered plans (including multiemployer 
plans) in the metropolitan Boston area.
    On April 29, 2006, the Independent Fiduciary issued a report to the 
Fund Administrator concerning the proposed transaction. In this report, 
the Independent Fiduciary reported that it had reviewed the 
contemplated purchase of Unit No. 1 by the Fund, and had determined 
that such a transaction would be in the interests of the Fund and 
protective of the rights of the participants and beneficiaries in the 
Fund. To support this determination, the Independent Fiduciary found 
that a number of serious functional shortcomings present at the 
Existing Facility--such as inefficient and crowded working conditions, 
a lack of adequate parking, and the lack of a fire sprinkler system--
would be remedied by relocating the Fund's offices to Unit No. 1.
    5. The Fund requests an administrative exemption from the 
Department to purchase Unit No. 1 from the Building Corporation. The 
Fund represents that the Purchase is in the best interests of the Fund 
for the reasons described above. The Fund proposes to purchase Unit No. 
1 from the Building Corporation for cash in a one-time transaction, and 
represents that the Building Corporation proposes to sell Unit No. 1 to 
the Fund for the lesser of (1) $800,000 or (2) the fair market value of 
Unit No. 1 as determined on the date of the purchase by a qualified, 
independent appraiser. The $800,000 figure for the purchase of Unit No. 
1 was determined by the Subcommittee as the maximum expenditure the 
Fund could afford after considering the liquidity needs of the Fund and 
other relevant economic factors. The Fund represents that the proposed 
cash purchase of Unit No. 1 by the Fund would involve the expenditure 
of less than 2% of the total assets held by the Fund as of November 30, 
2006. The Fund further represents that the proposed transaction will 
not be consummated unless and until the Department grants the requested 
exemption. If the Department grants the proposed exemption, a final 
appraisal of Unit No. 1 will be performed at the time of the real 
estate closing by an independent qualified appraiser.
    6. In summary, the Fund represents that the proposed transaction 
satisfies the requirements for an administrative exemption under 
section 408(a) of the Act because (a) the terms of the transaction are 
no less favorable to the Fund than terms negotiated under similar 
circumstances at arm's length with unrelated third parties, (b) the 
Purchase is a one-time transaction for cash; (c) the Fund will not pay 
any sales commissions, fees, or other similar expenses to any party as 
a result of the proposed transaction, (d) the Fund will purchase Unit 
No. 1 from the Building Corporation for the lesser of (1) $800,000 or 
(2) the fair market value of Unit No. 1 as determined on the date of 
the purchase by a qualified, independent appraiser, (e) the proposed 
transaction will be consummated only after a qualified, independent 
fiduciary, acting on behalf of the Fund, negotiates the relevant terms 
and conditions of the transaction and determines that proceeding with 
the transaction would be in the interest of the Fund, and (f) the 
independent fiduciary monitors the transaction on behalf of the Fund to 
ensure compliance with the agreed upon terms.

    Notice to Interested Persons: The Fund represents that 
interested personas will receive, within fifteen (15) days after the 
date of its publication in the Federal Register, a copy of this 
Notice of Proposed Exemption (the Notice). In this regard, the Fund 
proposes mailing a copy of the Notice, accompanied by a copy of the 
supplemental statement (the Supplemental Statement) required 
pursuant to 29 CFR 2570.43(b)(2), to all participants and 
beneficiaries of the Fund by first class mail, postage prepaid. In 
addition, the Fund proposes to post copies of the Notice and the 
Supplemental Statement at the entrance to the Fund's Existing 
Facility at 43 Kingston Street, Boston, Massachusetts; on the 
bulletin board or area where notices are generally posted by the 
Union at the local's headquarters at 1157 Adams Street, Boston, 
Massachusetts; and on the bulletin board or area where notices are 
generally posted at the Training Center at 1181 Adams Street, 
Boston, Massachusetts.

    The Department must receive all written comments and requests for a 
hearing no later than forty-five (45) days after publication of the 
Notice in the Federal Register.
    For Further Information Contact: Mr. Mark Judge of the Department, 
telephone (202) 693-8339. (This is not a toll-free number).

Paul Niednagel IRAs and Lynne Niednagel IRAs (collectively, the IRAs),

Located in Laguna Niguel, California

[Exemption Application Numbers: D-11393 and D-11394]

Proposed Exemption
    The Department is considering granting an exemption under the 
authority of 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 sanctions resulting 
from the application of section 4975 of the Code, by reason of sections 
4975(c)(1)(D) and (E) of the Code, shall not apply to the purchase (the 
Purchase) by the respective IRAs \3\ of Paul and Lynne Niednagel (the 
Account Holders) of certain ownership interests (the Units) from 
Pacific Island Investment Partners, LLC (Pacific Island) (the issuer of 
the Units), an entity which is indirectly controlled by Daniel and 
Stephen Niednagel (the Principals), both of

[[Page 30638]]

whom are lineal descendents of the Account Holders and therefore 
disqualified persons with respect to the IRAs, provided that the 
following conditions are satisfied:
---------------------------------------------------------------------------

    \3\ Because each IRA has only one participant, there is no 
jurisdiction under 29 CFR 2510.3-3(b). However, there is 
jurisdiction under Title II of the Act pursuant to section 4975 of 
the Code.
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Conditions
    (a) The Purchase of the Units by each IRA is a one-time transaction 
for cash;
    (b) The price paid by each IRA to purchase a Unit ($10,000) is 
identical to the price paid by other Pacific Island investors to 
acquire a Unit;
    (c) The terms and conditions of each Purchase are at least as 
favorable as those available in an arm's length transaction with an 
unrelated third party;
    (d) Each IRA does not pay any commissions or other expenses in 
connection with each Purchase; and
    (e) The IRA assets invested in the Units do not exceed 25% of the 
total assets of each IRA at the time of the Purchase.
Summary of Facts and Representations
    1. The applicants describe the Account Holders, the Principals, and 
the IRAs as follows:
    (a) Paul Niednagel is the spouse of Lynne Niednagel and the father 
of each of the Principals. He is the beneficial owner of a traditional 
IRA trusteed by Charles Schwab and established under section 408 of the 
Code. He is also the beneficial owner of a Roth IRA trusteed by Pensco 
Trust Company and established under 408A of the Code. As of December 
31, 2006, the combined value of these IRAs was $727,114.01.
    (b) Lynne Niednagel is the spouse of Paul Niednagel and the mother 
of each of the Principals. She is the beneficial owner of a traditional 
IRA trusteed by Charles Schwab and established under section 408 of the 
Code. She is also the beneficial owner of a Roth IRA trusteed by Pensco 
Trust Company and established under section 408A of the Code. As of 
December 31, 2006, the combined value of these IRAs was $ 69,535.24.
    (c) Daniel Niednagel is the 100% owner of Skizzim.com, also doing 
business as Skizzim Financial (Skizzim). Stephen Niednagel is the 100% 
owner of Three Arch Capital, LLC (Three Arch). Both Skizzim and Three 
Arch manage the assets of, and are respectively 50% owners of, a 
limited liability company known as Bird Rock Ventures, LLC (Bird Rock). 
Bird Rock, in turn, operates as the manager of Pacific Island. In 
addition, Daniel and Stephen Niednagel serve as Principals of Pacific 
Island.
    2. The Units are issued by Pacific Island, which is a California 
limited liability company formed to invest in commercial and real 
estate loans. Pacific Island's primary activity is to purchase, at a 
discount, sub-performing or non-performing real estate loans (the 
Loans). The Loans will be primarily secured by first, second, and third 
trust deeds (and related collateral) on real property located in 
California, although Pacific Island may invest in Loans secured by real 
property in other states.
    3. A private placement consisting of 250 Units of limited liability 
company interest in Pacific Island, at a uniform purchase price of 
$10,000 per Unit, was offered to investors beginning on August 28, 
2003. The purpose of this placement is to provide Pacific Island with 
sufficient capital to acquire the Loans. The acquisition of a Unit by 
an investor entitles such person to admission as a member (Member) of 
Pacific Island. Units may only be sold to investors who (i) buy a 
minimum of one Unit (or a fractional Unit thereof, computed on a pro-
rata basis) for a purchase price of $10,000, and (ii) represent in 
writing that they meet the investor suitability requirements 
established by Bird Rock (the Manager) as well as those that may be 
required under Federal or State law. The financial exposure of such 
Members is limited to each Member's respective investment interests in 
the Units.
    4. The applicants request an exemption for the proposed Purchase of 
the Units by the individual IRAs (both traditional and Roth) of the 
respective Account Holders. As of January 1, 2007, the Account Holders, 
in their individual capacities, hold approximately 10.0% of the Units 
of Pacific Island, while the lineal descendents of the Account Holders 
hold approximately 15.7% of the Units. Accordingly, the majority of the 
Units in Pacific Island are owned by Members other than the Account 
Holders and their lineal decedents.\4\
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    \4\ The Department notes that a divergence of interests may 
develop over time between (1) the IRAs and the IRA fiduciaries in 
their capacities as individuals, or (2) the IRAs and other persons 
in which the IRA fiduciaries, in their individual capacities, may 
have an interest. In the interests develops event that such a 
divergence of, the IRA fiduciaries would be required to take steps 
to eliminate the conflict of interest in order to avoid engaging in 
a prohibited transaction.
---------------------------------------------------------------------------

    5. The applicants represent that each IRA will pay no commissions 
or other expenses in connection with the Purchase. The Purchase will 
involve a one-time transaction for cash. Each IRA will pay a purchase 
price ($10,000) for a Unit of Pacific Island; this price is identical 
to the price paid for each Unit of Pacific Island by other investors. 
The applicants further represent that the value of the Units to be 
purchased will not exceed 25% of the value of the assets of each IRA at 
the time of the proposed transaction.
    6. The applicants represent that the proposed transactions are 
feasible in that each Purchase will involve a one-time transaction for 
cash. Furthermore, the applicants represent that the proposed 
transaction will be in the best interests of each IRA in that the 
Purchases will enable each IRA to invest in an instrument which, based 
on recent history, has yielded a favorable rate of return for 
investors. In this connection, the applicants represent that the 
Purchases of Units by the IRAs will not require the payment of 
commissions or other expenses.
    Finally, the applicants represent that the transactions will be 
protective of the rights of each participant because, at the time of 
the Purchase, the investment will not exceed 25% of the assets of each 
IRA.
    7. In summary, the applicants represent that the proposed 
transactions satisfy the statutory criteria of section 4975(c)(2) of 
the Code because: (a) The Purchase of the Units will be a one-time 
transaction for cash; (b) Each IRA will purchase each Unit at a price 
($10,000) that is identical to the price paid by other investors in 
acquiring a Unit; (c) The terms and conditions of each Purchase will be 
at least as favorable as those available in an arm's length transaction 
with an unrelated third party; (d) Each IRA will not pay any 
commissions or other expenses in connection with each Purchase; and (e) 
The IRA assets invested in the Units will not exceed 25% of the total 
assets of each IRA at the time of the Purchase.

    Notice to Interested Persons: Because the applicants are the 
only participants in the IRAs, it has been determined that there is 
no need to distribute this notice of proposed exemption (the Notice) 
to interested persons. Comments and requests for a hearing are due 
thirty (30) days after publication of the Notice in the Federal 
Register.


FOR FURTHER INFORMATION CONTACT: Mr. Mark Judge of the Department, 
telephone (202) 693-8339. (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

[[Page 30639]]

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 25th day of May, 2007.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department Of Labor.
[FR Doc. E7-10488 Filed 5-31-07; 8:45 am]

BILLING CODE 4510-29-P