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Secretary of Labor Thomas E. Perez
Grant of Amendment to Prohibited Transaction Exemption (PTE) 97- 35 Involving the Amalgamated Bank of New York (the Bank) Located in New York, NY [Notices] [07/08/1998]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Amendment to Prohibited Transaction Exemption (PTE) 97- 35 Involving the Amalgamated Bank of New York (the Bank) Located in New York, NY [07/08/1998]

[PDF Version]

Volume 63, Number 130, Page 36943-36946

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 98-35; Exemption Application Nos. D-
10546]

 
Grant of Amendment to Prohibited Transaction Exemption (PTE) 97-
35 Involving the Amalgamated Bank of New York (the Bank) Located in New 
York, NY

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

ACTION: Grant of Amendment to PTE 97-35.

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SUMMARY: This document contains a final exemption which amends PTE 97-
35 (62 FR 41088, July 31, 1997), an individual administrative exemption 
involving 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. These transactions are described in a notice of pendency that 
was published in the Federal Register on March 30, 1998 at 63 FR 15228.

EFFECTIVE DATE: This exemption is effective as of July 1, 1995, except 
for: (1) Plan investments in the LEI Fund, for which the effective date 
is January 3, 1998; (2) Plan investments in the LongView 500 Index 
Fund, for which the effective date is December 8, 1997; and (3) 
transactions involving the UNITE Staff Retirement Plan, for which the 
effective date is July 8, 1998.

FOR FURTHER INFORMATION CONTACT: Mr. Ron Willett, Office of Exemption 
Determinations, Pension and Welfare Benefits Administration, U.S. 
Department of Labor, Washington, D.C. 20210, telephone (202) 219-8881. 
(This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: On March 30, 1998, the Department of Labor 
(the Department) published a notice of proposed exemption (the Notice) 
in the Federal Register (63 FR 15228) to amend PTE 97-35. PTE 97-35 
provides an exemption from certain prohibited transaction restrictions 
of sections 406(a), 406(b)(1) and (b)(2) of the Employee Retirement 
Income Security Act of 1974 as amended (the Act), and from the 
sanctions resulting from the application of section 4975 of the 
Internal Revenue Code of 1986 as amended (the Code), by reason of 
section 4975(c)(1)(A) through (E) of the Code. The Notice was requested 
in an application filed on behalf of the Bank 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 Procedures). Effective December 31, 1978, 
section 102 of Reorganization Plan No. 4 of 1978 (5 USC App.1, 1996) 
transferred the authority of the Secretary of the Treasury to issue 
exemptions of the type requested to the Secretary of Labor. 
Accordingly, this exemption is being issued solely by the Department.

WRITTEN COMMENTS: The Notice gave interested persons the opportunity to 
comment and to request a public hearing on the matters described 
therein. The Department received one written comment and no hearing 
requests from interested persons following the dissemination of the 
Notice and supplemental statement.
    The written comment received by the Department was submitted on 
behalf of the Bank concerning the effective date of a portion of the 
requested exemption, as proposed in the Notice. In this regard, the 
Notice proposed that the effective date for the final exemption be 
described as follows:

    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 Bank states that in its exemption application a request was 
made for the final exemption to be effective as of the date the 
application was filed with the Department (i.e., December 4, 1997) with 
respect to Plan investments in the LongView 500 Fund (the 500 Fund), 
because the Bank had expected that Plan investments in the 500 Fund 
would occur shortly after such filing. However, in the Notice, the 
proposed effective date with respect to Plan investments in the 500 
Fund was inadvertantly described as the date on which the final 
exemption, if granted, would be published in the Federal Register. In 
its comment, the Bank explains that the actual date of the first 
investment made by a Plan in the 500 Fund was December 8, 1997, when 
the ILGWU Death Benefit Plan (one of the Plans covered by PTE 97-35) 
made such an investment. Therefore, the Bank requests that the final 
exemption for Plan investments in the 500 Fund be effective as of 
December 8, 1997. In the final exemption, the Department has stated the 
effective date in accordance with the Bank's request, by inserting a 
reference to the appropriate date in both the definition of ``Banking 
Services'' in Section IV(c) and the effective date paragraph for this 
Grant notice.
    Based on the entire application record, including the Bank's 
written comment regarding the Notice, the Department has determined to 
grant the amendment to PTE 97-35 with the modification to the effective 
date requested by the Bank.

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 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 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;

[[Page 36944]]

    (2) The exemption will not extend to transactions prohibited under 
section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;
    (3) In accordance with section 408(a) of the Act and 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 finds that the exemption is 
administratively feasible, in the interests of the plans and their 
participants and beneficiaries and protective of the rights of the 
participant and beneficiaries;
    (4) This exemption 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 exemption is subject to the express condition that the 
Summary of Facts and Representations set forth in the proposed 
exemption relating to PTE 97-35, as amended by this grant notice, 
accurately describe, where relevant, the material terms of the 
transactions consummated pursuant to that exemption.

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 cited 
above, the Department hereby amends PTE 97-35.

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 [except as otherwise indicated 
herein], 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.
    (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

[[Page 36945]]

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) effective December 8, 1997, 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 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 is effective as of July 1, 1995, except 
for: (1) Plan investments in the LEI Fund, for which the effective date 
is January 3, 1998; (2) Plan investments in the LongView 500 Index 
Fund, for which the effective date is December 8, 1997; and (3) 
transactions involving the UNITE Staff Retirement Plan, for which the 
effective date is July 8, 1998.
    The availability of this 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 application change, the

[[Page 36946]]

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 this exemption, refer to 
the proposed exemption (i.e., the Notice) and the prior grant notice 
for PTE 97-35, which are cited above.

    Signed at Washington, D.C., this 1st day of July, 1998.
Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 98-18011 Filed 7-7-98; 8:45 am]
BILLING CODE 4510-29-P