Skip to page content
Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; Lehman Brothers, Inc. [Notices] [10/25/1996]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; Lehman Brothers, Inc. [10/25/1996]

[PDF Version]

Volume 61, Number 208, Page 55325-55326

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

DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 96-80; Exemption Application No. D-
10255, et al.]

 
Grant of Individual Exemptions; Lehman Brothers, Inc.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemptions.

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

SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at the Department in Washington, D.C. The notices also 
invited interested persons to submit comments on the requested 
exemptions to the Department. In addition the notices stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicants have represented that they 
have complied with the requirements of the notification to interested 
persons. No public comments and no requests for a hearing, unless 
otherwise stated, were received by the Department.
    The notices of proposed exemption were issued and the exemptions 
are being granted solely by the Department because, effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 
47713, October 17, 1978) 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 exemptions are administratively feasible;
    (b) They are in the interests of the plans and their participants 
and beneficiaries; and
    (c) They are protective of the rights of the participants and 
beneficiaries of the plans.

Lehman Brothers, Inc. (Lehman) Located in New York, New York

[Prohibited Transaction Exemption 96-80; Exemption Application No. 
D-10255]

Exemption

    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)

[[Page 55326]]

through (D) of the Code, shall not apply to the sales of collateralized 
guaranteed investment contracts (CGICs) by Lehman to employee benefit 
plans (the Plans), provided the following conditions are satisfied: (a) 
The decision to purchase a CGIC will be made by a fiduciary of a Plan 
who is independent of Lehman; (b) Lehman will provide the independent 
fiduciary with audited and unaudited statements of its financial 
condition at the time of the purchase of the CGIC and subsequently as 
issued; (c) Lehman will transfer to a tri-party custodial account, 
under the exclusive direction of a Plan's trustees, securities selected 
by the Plan with a market value equal to at least 102% of the CGIC's 
purchase price; (d) such securities will be marked to market on a daily 
basis, and Lehman will be required to maintain the market value of the 
securities at the agreed-upon level of at least 102% of the CGIC's 
purchase price; (e) a Plan will receive daily reports describing the 
securities on deposit and their market value, and monthly reports 
describing all activity with respect to the CGIC, including accrued 
interest; (f) a Plan will have full recourse against Lehman for all 
obligations and expenses owed to it by Lehman; (g) Lehman will be 
responsible for all legal fees and expenses associated with any failure 
to fulfill its obligations under a CGIC; (h) a Plan will have an 
unqualified right to the return of its principal and accrued interest 
no later than the conclusion of the stated term of the CGIC; (i) if a 
Plan requires a termination of a CGIC prior to maturity to pay benefit 
responsive payments, no market value adjustment will be imposed; and 
(j) Lehman will market CGICs only to Plans with assets having an 
aggregate market value of at least $50 million.
    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 August 27, 1996 at 61 FR 
44087.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

Rexam Retirement Savings Plan (the Plan) Located In Charlotte, North 
Carolina

[Prohibited Transaction Exemption 96-81; Exemption Application No. 
D-10294]

Exemption

    The restrictions of sections 406(a) and 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 loan of $1,620,246.56 (the Loan) to the Plan 
from Rexam, Inc. (the Employer) with respect to the Guaranteed 
Investment Contract No. 63217 (the GIC) issued by Confederation Life 
Insurance Company (Confederation) and the Plan's potential repayment of 
the Loan upon the receipt by the Plan of payments under the GIC; 
provided the following conditions are satisfied:
    (A) All terms and conditions of the transactions are no less 
favorable to the Plan than those that the Plan could obtain in arm's-
length transactions with unrelated parties;
    (B) No interest payments or other expenses are paid by the Plan in 
connection with the Loan and its repayment;
    (C) The Loan will be repaid only from proceeds paid to the Plan by 
Confederation, its successors, or by any other third-party;
    (D) Repayment of the Loan will be waived to the extent that the 
Loan exceeds the proceeds from the GIC;
    (E) If total proceeds received by the Plan with respect to the GIC 
exceed the amount of the Loan, the excess will be credited to the 
respective accounts of the participants in proportion to the relative 
investment of each account in the GIC on June 25, 1996; and
    (F) A qualified, independent fiduciary represented the Plan at the 
execution of the Loan and will continue to represent the interests of 
the Plan throughout the duration and repayment of the Loan.

EFFECTIVE DATE: The exemption is effective as of June 25, 1996.

FOR FURTHER INFORMATION CONTACT: Mr. C.E. Beaver of the Department, 
telephone (202) 219-8881. (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 exemptions do 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) These exemptions are 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 these exemptions is subject to the express 
condition that the material facts and representations contained in each 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, D.C., this 22nd day of October, 1996.
 Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 96-27442 Filed 10-24-96; 8:45 am]
BILLING CODE 4510-29-P