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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; The Sperry Rail, Inc. [Notices] [01/13/1998]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; The Sperry Rail, Inc. [01/13/1998]

[PDF Version]

Volume 63, Number 8, Page 1979-1981

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 98-01; Exemption Application No. D-
10452, et al.]

 
Grant of Individual Exemptions; The Sperry Rail, Inc.

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.

The Sperry Rail, Inc. Retirement Plan (the Plan) Located in Danbury, 
Connecticut

[Prohibited Transaction Exemption 98-01; Exemption Application No. D-
10452]

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 to the loan (the Loan) by the Plan of $965,000 to 
Sperry Rail, Inc., the Plan sponsor and a party in interest with 
respect to the Plan, provided the following conditions are satisfied: 
(a) The Loan does not

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exceed 25% of the assets of the Plan; (b) the Loan is at terms not less 
favorable to the Plan than those obtainable in an arm's-length 
transaction with an unrelated party; (c) the Loan is secured by 
personal property that has been appraised by an independent appraiser 
as having a fair market value not less than 200% of the principal 
amount of the Loan; (d) an independent fiduciary has reviewed the 
proposed Loan on behalf of the Plan and has determined that the Loan is 
in the best interest of the Plan and its participants and 
beneficiaries; and (e) the Plan's independent fiduciary will monitor 
the Loan throughout its duration to ensure that it remains in the best 
interest of the Plan and continues to meet the conditions of the 
exemption.
    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 October 2, 1997 at 62 FR 
51692.

Notice to Interested Persons

    The applicant represents that it was unable to comply with the 
notice to interested persons requirement within the time frame stated 
in its application. However, the applicant has represented that it 
notified all interested persons, in the manner agreed upon between the 
applicant and the Department, by November 15, 1997. Interested persons 
were informed that they had until December 15, 1997 to comment or 
request a hearing with respect to the proposed exemption. No comments 
or hearing requests were received by the Department.
    For Further Information Contact: Gary H. Lefkowitz of 
theDepartment, telephone (202) 219-8881. (This is not a toll-free 
number.)

First Bank System Personal Retirement Account (the Plan) Located in 
Minneapolis, Minnesota

[Prohibited Transaction Exemption 98-02; Exemption Application No. D-
10471]

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 to (1) the contribution to the Plan by U.S. Bancorp 
(the Employer), formerly First Bank System, Inc., the sponsor of the 
Plan, of the Employer's interests in two limited partnership funds (the 
Interests) organized and managed by Kohlberg Kravis Roberts & Co. 
(KKR); and (2) the grant by the Employer to the Plan of an option (the 
Put) under which the Plan is empowered at any time to require the 
Employer to repurchase the Interests from the Plan at any time; 
provided that the following conditions are satisfied:
    (a) The Interests are valued at their fair market value as of the 
date of contribution by a qualified, independent appraiser;
    (b) The sum of the fair market value of the Interests plus the fair 
market value of any other KKR-related investments held by the Plan does 
not exceed ten percent of the fair market value of the Plan's total 
assets at the time of the contribution of the Interests to the Plan;
    (c) The Plan is represented for all purposes with respect to the 
Interests by a qualified independent fiduciary (the Fiduciary), as 
described in the Notice of Proposed Exemption, for the duration of the 
Plan's holding of any of the Interests;
    (d) The Fiduciary takes whatever action is necessary, as determined 
by the Fiduciary in its sole discretion, to enforce the conditions of 
this exemption and to protect the Plan's investment in the Interests, 
including, but not limited to the exercise of the Put;
    (e) The Fiduciary retains the right under the Put to require the 
Employer, at any time, to purchase some or all of the Interests from 
the Plan for the greater of (1) the Interests' fair market value as of 
the contribution date, or (2) the fair market value of the Interests as 
of the date of such sale pursuant to the Put; and
    (f) For the duration of the Plan's investment in the Interests, the 
Employer's obligations under the Put are secured by the Collateral (as 
described in the Notice of Proposed Exemption) in escrow representing 
no less than one third of the fair market value of the Interests at the 
time of their contribution to the Plan, and the Fiduciary requires 
additional Collateral to be deposited in the escrow whenever the value 
of the Interests increases.
    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 
November 4, 1997 at 62 FR 59740.
    For Further Information Contact: Ronald Willett of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

Robert A. Doneff Custodial IRA (the IRA) Located in Manitowoc, WI

[Prohibited Transaction Exemption 98-03; Exemption Application No. D-
10480]

Exemption

    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 cash sale (the Sale) of a certain parcel of real 
property (the Property) by the IRA <SUP>1</SUP> to Robert A. Doneff 
(Mr. Doneff), a disqualified person with respect to the IRA, provided 
that the following conditions are met:
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    \1\ Because Mr. Doneff is the only participant in the IRA, there 
is no jurisdiction under 29 CFR Sec. 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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    (a) The Sale is a one-time transaction for cash;
    (b) The terms and conditions of the Sale are at least as favorable 
to the IRA as those obtainable in an arm's length transaction with an 
unrelated party;
    (c) The IRA receives the fair market value of the Property, as 
established at the time of the Sale by a qualified, independent 
appraiser; and
    (d) The IRA is not required to pay any commissions, costs, or other 
expenses in connection with the Sale.
    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 October 20, 1997 at 62 FR 
54479.
    For Further Information Contact: Mr. James Scott Frazier 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 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;

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    (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, DC, this 7th day of January, 1998.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 98-670 Filed 1-12-98; 8:45 am]
BILLING CODE 4510-29-P