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Secretary of Labor Thomas E. Perez
Notice of Proposed Individual Exemption To Amend and Replace Prohibited Transaction Exemption (PTE) 97-35 Involving Amalgamated Bank of New York (the Bank) Located in New York, NY [Notices] [03/30/1998]

EBSA (Formerly PWBA) Federal Register Notice

Notice of Proposed Individual Exemption To Amend and Replace Prohibited Transaction Exemption (PTE) 97-35 Involving Amalgamated Bank of New York (the Bank) Located in New York, NY [03/30/1998]

[PDF Version]

Volume 63, Number 60, Page 15228-15231

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Application No. D-10546]

 
Notice of Proposed Individual Exemption To Amend and Replace 
Prohibited Transaction Exemption (PTE) 97-35 Involving Amalgamated Bank 
of New York (the Bank) Located in New York, NY

AGENCY: Pension and Welfare Benefits Administration, U.S. Department of 
Labor.

ACTION: Notice of proposed individual exemption to modify andreplace 
PTE 97-35.

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SUMMARY: This document contains a notice of pendency before the 
Department of Labor (the Department) of a proposed individual exemption 
which, if granted, would amend and replace PTE 97-35 (62 FR 41088, July 
31, 1997). PTE 97-35 permits, among other things, the provision of 
banking services by the Bank to 22 employee benefit plans (the Plans) 
listed in the exemption, all of which are affiliated with the Union of 
Needletrades, Industrial and Textile Employees (UNITE), which is the 
majority and controlling shareholder in the Bank. PTE 97-35 is 
effective as of July 1, 1995, except for Plan investments in a fund 
maintained by the Bank designated as the LEI Fund, for which the 
effective date is January 3, 1998.
    If granted, the proposed exemption would replace PTE 97-35 but 
would incorporate by reference the facts, representations and all of 
the conditions that are contained in the notice and the final 
exemption.

DATES: Written comments and requests for a public hearing should be 
received by the Department on or before May 29, 1998.

ADDRESSES: All written comments and requests for a public hearing 
(preferably, three copies) should be sent to the Office of Exemption 
Determinations, Pension and Welfare Benefits Administration, Room N-
5649, U.S. Department of Labor, 200 Constitution Avenue, N.W., 
Washington, D.C. 20210, Attention: Application No. D-10546. The 
application pertaining to the proposed exemption and the comments 
received will be available for public inspection in the Public 
Documents Room of the Pension and Welfare Benefits Administration, U.S. 
Department of Labor, Room N-5638, 200 Constitution Avenue, N.W., 
Washington, D.C. 20210.

FOR FURTHER INFORMATION CONTACT: Ronald Willett, Office of Exemption 
Determinations, Pension and Welfare Benefits Administration, U.S. 
Department of Labor, telephone (202) 219-8881. (This is not a toll-free 
number.)

SUPPLEMENTARY INFORMATION: Notice is hereby given of the pendency 
before the Department of a proposal to amend and replace PTE 97-35. PTE 
97-35 provides relief, effective July 1, 1995, from 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. The request to amend 
and replace PTE 97-35 was set forth in an exemption application dated 
December 4, 1997, filed on behalf of the Bank. The Department is 
proposing the exemption to amend and replace PTE 97-35 pursuant to 
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).
    The applicant requested modifications to sections IV(C) and IV(E) 
of the exemption. Section IV(C) of PTE 97-35 provides that:

    Banking Services means (1) custodial, safekeeping, checking 
account, trustee services, and (2) investment management services 
involving (a) fixed income securities (either directly or through a 
collective investment fund maintained by the Bank), (b) the LongView 
Fund maintained by the Bank, and, (c) effective January 3, 1998, the 
LEI Fund maintained by the Bank.

The Bank has requested that this definition be modified to add another 
investment fund to those covered by PTE 97-35. The Banking Services 
covered by the exemption include investments by the Plans in the 
LongView Fund maintained by the Bank. As described in the Written 
Comments in PTE 97-35, the LongView Fund is a bank collective 
investment fund that is designed to mirror the S&P 500 Index. The 
LongView Fund is established and maintained pursuant to Revenue Ruling 
81-100 and, accordingly, investments therein are restricted to tax 
qualified plans. The Bank represents that in response to expressions of 
interest from several investors, it has developed an additional fund, 
the LongView 500 Index Fund (the 500 Index Fund), designed to mirror 
the S&P 500 Index, for investment by tax-qualified plan investors and 
investors other than tax qualified plans. The Bank represents that 
except for the fact that the investors will include entities other than 
tax-qualified plans, the 500 Index Fund will be managed and 
restructured in a manner identical to the LongView Fund. The proposed 
addition of the 500 Index Fund to the definition of Banking Services 
under the exemption and the potential investments by the Plans in the 
500 Index Fund have been analyzed and evaluated by U.S. Trust, which is 
the Independent Fiduciary representing the interests of the Plans under 
PTE 97-35. Consistent with the approach taken under PTE 97-35, the Bank 
directed an analysis of the 500 Index Fund by the commercial management 
consulting firm of Towers Perrin. Utilizing a report by Towers Perrin, 
the Independent Fiduciary determined that the addition of the 500 Index 
Fund as an available investment under the exemption would be in the 
best interests of the Plans. Accordingly, the Bank requests that 
Section IV(C) of the exemption be amended by adding the LongView 500 
Index Fund to the definition of Banking Services.
    Section IV(E) of PTE 97-35 identifies the 22 plans which are 
covered by the exemption. The Bank states that since PTE 97-35 was 
issued, a new employee benefit plan, the UNITE Staff Retirement Plan, 
ILGWU Unit (the New Plan), has expressed an interest in using the 
Bank's services under the exemption. The New Plan covers UNITE 
employees formerly employed by ILGWU prior to the merger which created 
UNITE. The Bank represents that the New Plan has no prior investment or 
other servicing relationship with the Bank but has expressed an 
interest in investing in the LongView Fund, which is among the Banking 
Services covered by the exemption. The Independent Fiduciary represents 
that it has reviewed the proposed provision of Banking Services to the 
New Plan by the Bank and the addition of the New Plan to those covered 
by the exemption. The Independent Fiduciary states that it has 
determined that inclusion of the New Plan under the exemption would be 
appropriate. Accordingly, the Bank requests that Section IV(E) of the 
exemption be amended to add the UNITE Staff Retirement Plan, ILGWU Unit 
to the list of plans covered by the exemption.
    The proposed exemption would affect participants and beneficiaries 
of, and fiduciaries with respect to, plans affiliated with UNITE for 
which the Bank provides Banking Services.

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Notice to Interested Persons

    Notice of the proposed exemption will be mailed by first class mail 
to each of the Plans, including the New Plan, within 30 days of the 
publication of the notice of pendency in the Federal Register. The 
notice will contain a copy of the notice of proposed exemption as 
published in the Federal Register and a supplemental statement, as 
required pursuant to 29 CFR 2570.43(b)(2). The supplemental statement 
will inform interested persons of their right to comment on and/or to 
request a hearing with respect to the pending exemption. Written 
comments and hearing requests are due within 60 days of the publication 
of the proposed exemption in the Federal Register.

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 Employee Retirement Income Security Act of 
1974, as amended (the Act), and section 4975(c)(2) of the Internal 
Revenue Code of 1986 (the Code) does not relieve a fiduciary or other 
party in interest or disqualified person from certain other provisions 
of the Act and the Code, including any prohibited transaction 
provisions to which the exemption does not apply and the general 
fiduciary responsibility provisions of section 404 of the Act, which 
require, among other things, a fiduciary to discharge his or her 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 requirements of 
section 401(a) of the Code that the plan operate for the exclusive 
benefit of the employees of the employer maintaining the plan and their 
beneficiaries;
    (2) The proposed exemption, if granted, will not extend to 
transactions prohibited under section 406(b)(3) of the Act and section 
4975(c)(1)(F) of the Code;
    (3) Before an exemption can be granted under section 408(a) of the 
Act and section 4975(c)(2) of the Code, the Department must find that 
the exemption is administratively feasible, in the interest of the plan 
and of its participants and beneficiaries and protective of the rights 
of participants and beneficiaries of the plan;
    (4) This proposed exemption, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and the Code, 
including statutory or administrative exemptions. 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
    (5) This proposed exemption, if granted, is subject to the express 
condition that the Summary of Facts and Representations set forth in 
the notice of proposed exemption relating to PTE 97-35, as amended by 
this notice, accurately describe, where relevant, the material terms of 
the transactions to be consummated pursuant to this exemption.

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemption to the address above, 
within 30 days after the publication of this proposed exemption in the 
Federal Register. All comments will be made a part of the record. 
Comments received will be available for public inspection with the 
referenced applications at the address set forth above.

Proposed Exemption

    Based on the facts and representations set forth in the 
application, the Department is considering granting the requested 
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).

Section I--Transactions

    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 July 1, 1995, to--
    (A) the provision of banking services (Banking Services, as defined 
in section IV(C)) by the Amalgamated Bank of New York (the Bank) to 
certain employee benefit plans (the Plans, as defined in section 
IV(E)), which are maintained on behalf of members of the former 
International Ladies Garment Workers Union (ILGWU), which merged on 
July 1, 1995 with the Amalgamated Clothing and Textile Workers Union to 
form the Union of Needletrades, Industrial and Textile Employees 
(UNITE);
    (B) the purchase by the Plans of certificates of deposit (CDs) 
issued by the Bank; and
    (C) the deposit of Plans' assets in money market or other deposit 
accounts established by the Bank;

provided that the applicable conditions of Section II and Section III 
are met.

Section II--Conditions

    (A) The terms under which the Banking Services are provided by the 
Bank to the Plans, and those under which the Plans purchase CDs from 
the Bank or maintain deposit accounts with the Bank, are at least as 
favorable to the Plans as those which the Plans could obtain in arm's-
length transactions with unrelated parties.
    (B) The interests of each of the Plans with respect to the Bank's 
provision of Banking Services to the Plans, the purchase of CDs from 
the Bank by any of the Plans, and the deposit of Plan assets in deposit 
accounts established by the Bank, are represented by an Independent 
Fiduciary (as defined in section IV(D)).
    (C) On a periodic basis, not less frequently than annually, an 
Authorizing Plan Fiduciary (as defined below in section IV(A)) with 
respect to each Plan authorizes the representation of the Plan's 
interests by the Independent Fiduciary and determines that the Banking 
Services and any CDs and depository accounts utilized by the Plan are 
necessary and appropriate for the establishment or operation of the 
Plan.
    (D) With respect to the purchase by any of the Plans of 
certificates of deposit (CDs) issued by the Bank or the deposit of Plan 
assets in a money market account or other deposit account established 
at the Bank: (1) Such transaction complies with the conditions of 
section 408(b)(4) of the Act; (2) Any CD offered to the Plans by the 
Bank is also offered by the Bank in the ordinary course of its business 
with unrelated customers; and (3) Each CD purchased from the Bank by a 
Plan pays the maximum rate of interest for CDs of the same size and 
maturity being offered by the Bank to unrelated customers at the time 
of the transaction.
    (E) The compensation received by the Bank for the provision of 
Banking Services to the Plan is not in excess of reasonable 
compensation within the meaning of section 408(b)(2) of the Act.
    (F) Following the merger of the ILGWU into UNITE, the Independent 
Fiduciary made an initial written determination that (1) the Bank's 
provision of Banking Services to the Plans, (2) the deposit of Plan 
assets in depository accounts maintained by the Bank, and (3) the 
purchase by the Plans of CDs from the Bank, are in the best interests 
and protective of the participants and beneficiaries of each of the 
Plans.

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    (G) On a periodic basis, not less frequently than quarterly, the 
Bank provides the Independent Fiduciary with a written report (the 
Periodic Report) which includes the following items with respect to the 
period since the previous Periodic Report: (1) a listing of Banking 
Services provided to, all outstanding CDs purchased by, and deposit 
accounts maintained for each Plan; (2) a listing of all fees paid by 
the Plans to the Bank for the Banking Services, (3) the performance of 
the Bank with respect to all investment management services, (4) a 
description of any changes in the Banking Services, (5) an explanation 
of any problems experienced by the Bank in providing the Banking 
Services, (6) a description of any material adverse events affecting 
the Bank, and (7) any additional information requested by the 
Independent Fiduciary in the discharge of its obligations under this 
exemption.
    (H) On a periodic basis, not less frequently than annually, the 
Independent Fiduciary reviews the Banking Services provided to each 
Plan by the Bank, the compensation received by the Bank for such 
services, any purchases by the Plan of CDs from the Bank, and any 
deposits of assets in deposit accounts maintained by the Bank, and 
makes the following written determinations:
    (1) The continuation of the Bank's provision of Banking Services to 
the Plan for compensation is in the best interests and protective of 
the participants and beneficiaries of the Plan;
    (2) The Bank is a solvent financial institution and has the 
capability to perform the services;
    (3) The fees charged by the Bank are reasonable and appropriate;
    (4) The services, the depository accounts, and the CDs are offered 
to the Plan on the same terms under which the Bank offers the services 
to unrelated Bank customers in the ordinary course of business; and
    (5) Where the Banking Services include an investment management 
service, that the rate of return is not less favorable to the Plan than 
the rates on comparable investments involving unrelated parties.
    (I) Copies of the Bank's periodic reports to the Independent 
Fiduciary are furnished to the Authorizing Plan Fiduciaries on a 
periodic basis, not less frequently than annually and not later than 90 
days after the period to which they apply.
    (J) The Independent Fiduciary is authorized to continue, amend, or 
terminate, without any penalty to any Plan (other than the payment of 
penalties required under federal or state banking regulations upon 
premature redemption of a CD), any arrangement involving: (1) the 
provision of Banking Services by the Bank to any of the Plans, (2) the 
deposit of Plan assets in a deposit account maintained by the Bank, or 
(3) any purchases by a Plan of CDs from the Bank;
    (K) The Authorizing Plan Fiduciary may terminate, without penalty 
to the Plan (other than the payment of penalties required under federal 
or state banking regulations upon premature redemption of a CD), the 
Plan's participation in any arrangement involving: (1) the 
representation of the Plan's interests by the Independent Fiduciary, 
(2) the provision of Banking Services by the Bank to the Plan, (3) the 
deposit of Plan assets in a deposit account maintained by the Bank, or 
(4) the purchase by the Plan of CDs from the Bank.

Section III--Recordkeeping

    (A) For a period of six years, the Bank and the Independent 
Fiduciary will maintain or cause to be maintained all written reports 
and other memoranda evidencing analyses and determinations made in 
satisfaction of conditions of this exemption, except that: (a) a 
prohibited transaction will not be considered to have occurred if, due 
to circumstances beyond the control of the Independent Fiduciary and 
the Bank, the records are lost or destroyed before the end of the six-
year period; and (b) no party in interest other than the Bank and the 
Independent Fiduciary 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 (B) 
below;
    (B)(1) Except as provided in section (2) of this paragraph (B) and 
notwithstanding any provisions of subsections (a)(2) and (b) of section 
504 of the Act, the records referred to in paragraph (A) of this 
Section III shall be unconditionally available at their customary 
location during normal business hours for inspection by: (a) any duly 
authorized employee or representative of the U.S. Department of Labor 
or the Internal Revenue Service, (b) any employer participating in the 
Plans or any duly authorized employee or representative of such 
employer, and (c) any participant or beneficiary of the Plans or any 
duly authorized representative of such participant or beneficiary.
    (2) None of the persons described in subsections (b) and (c) of 
section (1) above shall be authorized to examine trade secrets of the 
Independent Fiduciary or the Bank, or any of their affiliates, or any 
commercial, financial, or other information that is privileged or 
confidential.

Section IV--Definitions

    (A) Authorizing Plan Fiduciary means, with respect to each Plan, 
the board of trustees of the Plan or other appropriate plan fiduciary 
with discretionary authority to make decisions with respect to the 
investment of Plan assets;
    (B) Bank means the Amalgamated Bank of New York;
    (C) Banking Services means (1) custodial, safekeeping, checking 
account, trustee services, and (2) investment management services 
involving (a) fixed income securities (either directly or through a 
collective investment fund maintained by the Bank), (b) the LongView 
Fund maintained by the Bank, (c) the LongView 500 Index Fund, and (d) 
effective January 3, 1998, the LEI Fund maintained by the Bank.
    (D) Independent Fiduciary means a person, within the meaning of 
section 3(9) of the Act, who (1) is not an affiliate of the Union of 
Needletrades, Industrial & Textile Employees (UNITE) and any successor 
organization thereto by merger, consolidation or otherwise, (2) is not 
an officer, director, employee or partner of UNITE, (3) is not an 
entity in which UNITE has an ownership interest, (4) has no 
relationship with the Bank other than as Independent Fiduciary under 
this exemption, and (5) has acknowledged in writing that it is acting 
as a fiduciary under the Act. No person may serve as an Independent 
Fiduciary for the Plans for any fiscal year in which the gross income 
(other than fixed, non-discretionary retirement income) received by 
such person (or any partnership or corporation of which such person is 
an officer, director, or ten percent or more partner or shareholder) 
from UNITE and the Plans for that fiscal year exceed five (5) percent 
of such person's annual gross income from all sources for the prior 
fiscal year. An affiliate of a person is any person directly or 
indirectly, through one or more intermediaries, controlling, controlled 
by, or under common control with the person. The term ``control'' means 
the power to exercise a controlling influence over the management or 
policies of a person other than an individual. Initially, the 
Independent Fiduciary is U.S. Trust Company of California, N.A.
    (E) Plans means any of the following employee benefit plans, and 
their

[[Page 15231]]

successors by reason of merger, spin-off or otherwise:

International Ladies Garment Workers Union Nation Retirement Fund;
International Ladies Garment Workers Union Death Benefit Fund;
Health Fund of New York Coat, Suit, Dress, Rainwear & Allied Workers 
Union, ILGWU;
Health & Vacation Fund, Amalgamated Ladies Garment Cutters Union, Local 
10;
ILGWU Eastern States Health & Welfare Fund; ILGWU Office, Clerical & 
Misc. Employee Retirement Fund;
ILGWU Retirement Fund, Local 102; Union Health Center Staff Retirement 
Fund;
Unity House 134 HREBIU Plan Fund;
Puerto Rican Health & Welfare Fund;
Health & Welfare Fund of Local 99, ILGWU;
Local 99 Exquisite Form Industries, Inc. Severance Fund;
Local 99 K-Mart Severance Fund;
Local 99 Kenwin Severance Fund;
Local 99 Lechters Severance Fund;
Local 99 Eleanor Shops Severance Fund;
Local 99 Monette Severance Fund;
Local 99 Moray, Inc. Severance Fund;
Local 99 Petri Stores, Inc. Severance Fund;
Local 99 Netco, Inc. Severance Fund;
Local 99 Misty Valley, Inc. Severance Fund;
Local 99 Norstan Apparel Shops, Inc. Severance Fund; and
UNITE Staff Retirement Plan, ILGWU Unit.
    (F) UNITE means the Union of Needletrades, Industrial & Textile 
Employees and any successor organization thereto by merger, 
consolidation or otherwise.

EFFECTIVE DATE: This exemption will be effective as of July 1, 1995, 
except for: (1) Plan investments in the LEI Fund, for which the 
effective date will be January 3, 1998; (2) Plan investments in the 
LongView 500 Index Fund, for which the effective date will be the date 
on which the final amended exemption, if granted, is published in the 
Federal Register; and (3) transactions involving the UNITE Staff 
Retirement Plan, for which the effective date will be the date on which 
the final amended exemption, if granted, is published in the Federal 
Register.
    The availability of this proposed exemption is subject to the 
express condition that the material facts and representations contained 
in the application for exemption are true and complete and accurately 
describe all material terms of the transactions. In the case of 
continuing transactions, if any of the material facts or 
representations described in the applications change, the exemption 
will cease to apply as of the date of such change. In the event of any 
such change, an application for a new exemption must be made to the 
Department.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant PTE 97-35, refer to the 
proposed exemption and grant notice which are cited above.

    Signed at Washington, D.C., this 25th day of March, 1998.
Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 98-8198 Filed 3-27-98; 8:45 am]
BILLING CODE 4510-29-P