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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; TA Associates, Inc. (TA Associates), et al. [Notices] [08/08/1997]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; TA Associates, Inc. (TA Associates), et al. [08/08/1997]

[PDF Version]

Volume 62, Number 153, Page 42839-42842

[DOCID:fr08au97-119]

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 97-42, et al.; Exemption Application 
No. D-10314, et al.]

 
Grant of Individual Exemptions; TA Associates, Inc. (TA 
Associates), et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    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.

TA Associates, Inc. (TA Associates) Located in Boston, MA

[Prohibited Transaction Exemption 97-42; Exemption Application No. D-
10314]

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) through (D) of the Code, shall not apply, 
effective December 29, 1993, to the making, by an employee benefit plan 
(the Plan), of capital contributions to any venture capital fund (the 
TA Fund) that is organized, sponsored and/or managed by TA Associates 
and/or any of its affiliates (collectively, TA) pursuant to a 
contractual obligation by a Plan having an interest in the TA Fund.
    This exemption is subject to the following conditions:
    (a) At the time the Plan undertakes the obligation to make such 
capital contributions (the Determination Date), the TA Fund is not a 
party in interest with respect to the Plan.
    (b) The decision to make a capital contribution to a TA Fund is 
made on behalf of the Plan by a Plan fiduciary which is independent of 
and unrelated to TA and the portfolio company whose interest is 
acquired by the TA Fund.
    (c) TA does not otherwise provide investment advice to the Plan 
within the meaning of Regulation section 29 CFR 2510.3-21(c) with 
respect to such Plan's assets that are invested in the TA Fund.
    (d) At the Determination Date, the Plan has aggregate assets that 
are in excess of $50 million; provided however, that in the case of--
    (1) Two or more Plans which are not maintained by the same 
employer, controlled group of corporations or employee organization 
(the Unrelated Plans), whose assets are invested in a TA Fund through a 
group trust, an insurance company pooled separate account or any other 
form of entity the assets of which are ``plan assets'' under 29 CFR 
2510.3-101 (the Plan Asset Regulation), the foregoing $50 million 
requirement shall in any event be satisfied if such trust, separate 
account or other entity has aggregate assets which are in excess of $50 
million, provided further that the fiduciary responsible for making the 
investment decision on behalf of such group trust, insurance company 
pooled separate account or other entity has--
    (i) Full investment responsibility <SUP>1</SUP> with respect to the 
plan assets invested therein; and
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    \1\ For purposes of this exemption, the term ``full investment 
responsibility'' means that the fiduciary responsible for making the 
investment decision has and exercises discretionary management 
authority over all of the assets of the group trust or other plan 
assets entity.
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    (ii) Total assets under its management and control, exclusive of 
the assets invested in the TA Fund, which are in excess of $100 
million, for TA Funds established after the date this grant notice is 
published in the Federal Register.
    (2) Two or more Plans which are maintained by the same employer, 
controlled group of corporations or employee organization (the Related 
Plans), whose assets are invested in a TA Fund through a master trust 
or any other entity the assets of which are ``plan assets'' under the 
Plan Asset Regulation, the $50 million requirement shall in any event 
be satisfied if such trust or other entity has aggregate assets which 
are in excess of $50 million, provided, further, that, in the case of a

[[Page 42840]]

TA Fund established after the date this grant notice is published in 
the Federal Register, in addition to the $50 million requirement, if 
the fiduciary responsible for making the investment decision on behalf 
of such master trust or other entity is not the employer or an 
affiliate of the employer, then such fiduciary has total assets under 
its management and control, exclusive of the assets invested in the TA 
Fund, which are in excess of $100 million.
    (e) Subsequent to the Determination Date, the TA Fund is a party in 
interest with respect to the Plan solely by reason of a relationship to 
a portfolio company which is a service provider to a Plan, as described 
in section 3(14) (H) or (I) of the Act, including a fiduciary with 
respect to such Plan.
    (f) At the Determination Date, the capital commitment of the Plan 
(together with the capital commitments of any other Plans maintained by 
the same employer, controlled group of corporations or employee 
organization) with respect to the TA Fund, does not exceed 15 percent 
of the total capital commitments with respect to such TA Fund.
    (g) At the Determination Date, the percentage of the Plan's assets 
committed to be invested in the TA Fund does not exceed 5 percent of 
the Plan's total assets.
    (h) At the Determination Date, a Plan's aggregate capital 
commitment to all TA Funds does not exceed 25 percent of the Plan's 
total assets.
    (i) The Plan receives the following initial and ongoing disclosures 
with respect to the TA Fund:
    (1) A copy of the private placement memorandum applicable to the TA 
Fund or another comparable document containing substantially the same 
information;
    (2) A copy of the limited partnership or other agreement 
establishing the TA Fund;
    (3) A copy of the subscription agreement applicable to the TA Fund, 
if any;
    (4) Copies of the proposed exemption and grant notice related to 
the exemptive relief described herein; and
    (5) Periodic, but no less frequently than annually, reports 
relating to the overall financial position and operational results of 
the TA Fund including copies of the TA Fund's annual financial 
statements.
    (j) With respect to capital contributions made to a TA Fund by a 
Plan after the date of issuance of the final exemption, TA maintains or 
causes to be maintained for a period of six years from the date of the 
transaction the records necessary to enable the persons described in 
paragraph (k) 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 TA, the records 
are lost or destroyed prior to the end of the six year period; and
    (2) No party in interest, other than TA, 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 (k).
    (k)(1) Except as provided in paragraph (k)(2) and notwithstanding 
any provisions of subsection (a)(2) and (b) of section 504 of the Act, 
the records referred to in paragraph (j) are unconditionally available 
at their customary location for examination during normal business 
hours by--
    (A) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service;
    (B) Any fiduciary of a Plan which has an interest in the TA Fund 
and has the authority to acquire or dispose of the interest of the Plan 
in the TA Fund, or any duly authorized employee or representative of 
such fiduciary; and
    (C) Any participant or beneficiary of any Plan which has an 
interest in the TA Fund or duly authorized representative of such 
participant or beneficiary.
    (2) None of the persons described in paragraph (k)(1)(B) and 
(k)(1)(C) shall be authorized to examine trade secrets of TA or 
commercial or financial information which is privileged or 
confidential.

EFFECTIVE DATE: This exemption is effective as of December 29, 1993.
    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 (the Notice) published on March 5, 
1997 at 62 FR 10075.

Written Comments

    The Department received one written comment with respect to the 
Notice. The comment, which was submitted by the applicant, requested 
modifications to the conditional language (the Conditions) and the 
Summary of Facts and Representations (the Summary) of the Notice in the 
following areas:
    1. Condition (d). Condition (d) of the Notice establishes a $50 
million threshold for Plans that are or will be covered by the 
exemption. Specifically, there is a sentence in Condition (d) which 
provides that the $50 million threshold will apply to the aggregate 
assets of a group trust or a master trust which invests in a TA Fund. 
TA requests that this concept also be applied to investments in a TA 
Fund by insurance company pooled separate accounts, large collective 
investment funds which are organized as partnerships, or other tax 
pass-through entities, provided the assets of these entities are deemed 
to be plan assets under the Plan Asset Regulation. Under these 
circumstances, TA believes that as long as the investing entity has 
assets in excess of $50 million and as long as the decision to invest 
in the TA Fund is made by an independent fiduciary unrelated to TA, 
then it is appropriate to apply the $50 million threshold to the 
aggregate assets held by the investing entity.
    Although the Department does not object to this provision, it 
wishes to emphasize its view that a fiduciary exercising investment 
discretion over a pooled investment vehicle that is invested in a TA 
Fund should possess some minimum level of investor sophistication. 
Therefore, the Department is proposing certain additional requirements 
for pooled arrangements involving the assets of either Unrelated Plans 
or Related Plans. These requirements are as follows:

A. Unrelated Plans

    For two or more Plans which are not maintained by the same 
employer, controlled group of corporations or employee organization, 
whose assets are invested in a TA Fund through a group trust, insurance 
company pooled separate account or other plan asset look-through 
entity, the $50 million threshold will apply to the aggregate assets of 
such entity so long as the fiduciary responsible for making the 
investment decision on behalf of the group trust, insurance company 
pooled separate account or other entity has full investment 
responsibility with respect to plan assets invested therein. However, 
in the event the entity holding the assets of Unrelated Plans is 
invested in a TA Fund established after the date this final exemption 
is granted, the fiduciary must, in addition to meeting the $50 million 
investment threshold, have total assets under its management and 
control, exclusive of the assets invested in the TA Fund, which are in 
excess of $100 million.

B. Related Plans

    With respect to two or more Plans, which are maintained by the same 
employer, controlled group of

[[Page 42841]]

corporations or employee organization, whose assets are invested in a 
TA Fund through a master trust or any other form of plan asset look-
through entity, the Department notes that the $50 million threshold may 
be satisfied by aggregating the assets of the investing Plans within 
the pooled vehicle. In this regard, the Department notes that an 
employer may retain an independent investment manager to manage all or 
a portion of Plan assets invested in a master trust. Under these 
circumstances, the Department believes that the independent investment 
manager must satisfy the outside business test for any TA Fund that is 
established after the date this grant notice is published in the 
Federal Register. In addition, the pooled vehicle would still have to 
meet the $50 million investment threshold.
    Accordingly, Condition (d) has been amended to read as follows:

    (d) At the Determination Date, the Plan has aggregate assets 
that are in excess of $50 million; provided however, that in the 
case of--
    (1) Two or more Plans which are not maintained by the same 
employer, controlled group of corporations or employee organization 
(the Unrelated Plans), whose assets are invested in a TA Fund 
through a group trust, an insurance company pooled separate account 
or any other form of entity the assets of which are ``plan assets'' 
under 29 CFR 2510.3-101 (the Plan Asset Regulation), the foregoing 
$50 million requirement shall in any event be satisfied if such 
trust, separate account or other entity has aggregate assets which 
are in excess of $50 million, provided further that the fiduciary 
responsible for making the investment decision on behalf of such 
group trust, insurance company pooled separate account or other 
entity has--
    (i) Full investment responsibility with respect to the plan 
assets invested therein; and
    (ii) Total assets under its management and control, exclusive of 
the assets invested in the TA Fund, which are in excess of $100 
million, for TA Funds established after the date this grant notice 
is published in the Federal Register.
    (2) Two or more Plans which are maintained by the same employer, 
controlled group of corporations or employee organization (the 
Related Plans), whose assets are invested in a TA Fund through a 
master trust or any other entity the assets of which are ``plan 
assets'' under the Plan Asset Regulation, the $50 million 
requirement shall in any event be satisfied if such trust or other 
entity has aggregate assets which are in excess of $50 million, 
provided, further, that, in the case of a TA Fund established after 
the date this grant notice is published in the Federal Register, in 
addition to the $50 million requirement, if the fiduciary 
responsible for making the investment decision on behalf of such 
master trust or other entity is not the employer or an affiliate of 
the employer, then such fiduciary has total assets under its 
management and control, exclusive of the assets invested in the TA 
Fund, which are in excess of $100 million.

    2. Condition (k)(1)(B). The applicant notes that the word ``who'' 
in Condition (k)(1)(B) should be changed to the word ``which.'' The 
Department concurs and has made the requested change.
    3. Condition (k)(1)(C). The applicant requests that Condition 
(k)(1)(C) be amended to clarify that a participant or a beneficiary of 
a Plan having an interest ``in a TA Fund'' (or the authorized 
representatives of these individuals) may review records that TA 
maintains with respect to the exemption. Therefore, the Department has 
agreed to modify this condition to read as follows:

Any participant or beneficiary of any Plan which has an interest in 
the TA Fund or duly authorized representative of such participant or 
beneficiary.

    4. Representation 3. Representation 3 of the Summary states that 
TA's most recent venture capital fund is Advent VII. Although Advent 
VII was the most recent TA Fund at the time the exemption application 
was filed, TA states that it subsequently closed a new TA Fund, TA/
Advent VIII, L.P. (Advent VIII), which as of December 31, 1996, had 
aggregate capital commitments of approximately $800 million from 96 
individual and institutional investors. Of the institutional investors, 
17 investors are Plans that are covered by the Act. As of December 31, 
1996, these Plans had made a total capital commitment to Advent VIII of 
approximately $188 million. In addition, TA wishes to clarify that it 
currently has organized, sponsored and/or managed 22 venture capital 
funds involving total capital commitments of approximately $2.25 
billion. The Department has noted these clarifications.
    5. Representation 7. To correct an inadvertent error on its part, 
TA wishes to clarify that the fourth line of Representation 7 of the 
Summary should refer to ``a greater than 10 percent interest in a 
portfolio'' rather than a ``100 percent interest.'' The Department 
notes this revision.
    6. Representation 8. TA wishes to clarify that in the sixth line of 
Representation 8 of the Summary, the word ``on'' should be changed to 
the word ``after.'' Again, the Department notes this revision.
    Thus, after giving full consideration to the entire record, 
including the written comment, the Department has made the 
aforementioned changes to the Notice and has decided to grant the 
exemption subject to the clarifications described above. The comment 
letter has been included as part of the public record of the exemption 
application. The complete application file, as well as all supplemental 
submissions received by the Department, is made available for public 
inspection in the Public Documents Room of the Pension and Welfare 
Benefits Administration, Room N-5638, U.S. Department of Labor, 200 
Constitution Avenue, N.W., Washington, D.C. 20210.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

First Savings Bank, F.S.B. Profit Sharing and Employee Stock Ownership 
Plan (the Plan) Located in Clovis, New Mexico

[Prohibited Transaction Exemption 97-43 Exemption Application No. D-
10409]

Exemption

    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, effective December 26, 1996 to (1) the acquisition by 
the Plan of certain stock rights (the Rights) pursuant to a stock 
rights offering (the Offering) by Access Anytime Bancorp, Inc. (the 
Parent), which is the parent corporation of First Savings Bank, F.S.B., 
the sponsor of the Plan; (2) the holding of the Rights by the Plan 
during the subscription period of the Offering; and (3) the exercise of 
certain of the Rights by the Plan; provided that the following 
conditions are met:
    (A) The Plan's acquisition and holding of the Rights occurred in 
connection with the Offering made available to all shareholders of 
common stock of the Parent;
    (B) All holders of the common stock of the Parent were treated in 
the same manner with respect to the Offering, including the Plan;
    (C) All decisions regarding the holding and potential exercise of 
the Rights by the Plan were made in accordance with Plan provisions for 
individually-directed investment of participant accounts by the 
individual Plan participants whose accounts in the Plan received Rights 
in the Offering; and
    (D) With respect to any participants' accounts in the Plan for 
which no valid instructions were timely filed regarding the Rights 
during the Offering, such Rights expired unexercised in the same manner 
as unexercised Rights issued to all other holders of the common stock 
of the Parent, since the Rights were not transferable and could not be 
sold.


[[Page 42842]]


EFFECTIVE DATE: This exemption is effective as of December 26, 1996.

WRITTEN COMMENTS: The Department no requests for a hearing and one 
written comment with respect to the proposed exemption. The comment was 
submitted by the applicant, the First Savings Bank, in correction of 
information submitted by the applicant which appeared in the Summary of 
Facts and Representations (the Summary) in the Notice of Proposed 
Exemption. The fourth paragraph of the Summary includes the Employer's 
representation that 5,000 Rights were exercised by Invested 
Participants, and that the remaining 4,798 Rights expired on the 
Expiration Date. The applicant notes that this representation was in 
error, reflecting a misunderstanding about the information that was 
requested. The applicant represents that the actual number of Rights 
exercised by Invested Participants was 367.
    After consideration of the entire record, as corrected by the 
applicant, the Department has determined to grant the exemption.
    For a more complete statement of the summary of facts and 
representations supporting the Department's decision to grant this 
exemption refer to the Notice of Proposed Exemption published on June 
4, 1997 at 62 FR 30620.

FOR FURTHER INFORMATION CONTACT: Ronald Willett 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 are true and complete and accurately describe all material 
terms of the transaction which is the subject of the exemption. In the 
case of continuing exemption transactions, if any of the material facts 
or representations described in the application change after the 
exemption is granted, the exemption will cease to apply as of the date 
of such change. In the event of any such change, application for a new 
exemption may be made to the Department.

    Signed at Washington, D.C., this 5th day of August, 1997.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 97-21005 Filed 8-7-97; 8:45 am]
BILLING CODE 4510-29-P