Skip to page content
Secretary of Labor Thomas E. Perez
Proposed Exemptions; Standard Bank Employees Profit Sharing Plan (the Plan) [Notices] [02/16/1999]

EBSA (Formerly PWBA) Federal Register Notice

Proposed Exemptions; Standard Bank Employees Profit Sharing Plan (the Plan) [02/16/1999]

[PDF Version]

Volume 64, Number 30, Page 7672-7676

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

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Application No. D-10693, et al.]

 
Proposed Exemptions; Standard Bank Employees Profit Sharing Plan 
(the Plan)

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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

SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions 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).

Written Comments and Hearing Requests

    Unless otherwise stated in the Notice of Proposed Exemption, all 
interested persons are invited to submit written comments, and with 
respect to exemptions involving the fiduciary prohibitions of section 
406(b) of the Act, requests for hearing within 45 days from the date of 
publication of this Federal Register Notice. Comments and requests for 
a hearing should state: (1) The name, address, and telephone number of 
the person making the comment or request, and (2) the nature of the 
person's interest in the exemption and the manner in which the person 
would be adversely affected by the exemption. A request for a hearing 
must also state the issues to be addressed and include a general 
description of the evidence to be presented at the hearing.

ADDRESSES: All written comments and request for a hearing (at least 
three copies) should be sent to the Pension and Welfare Benefits 
Administration, Office of Exemption Determinations, Room N-5649, U.S. 
Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 
20210. Attention: Application No. stated in each Notice of Proposed 
Exemption. The applications for exemption and the comments received 
will be available for public inspection in the Public Documents Room of 
Pension and Welfare Benefits Administration, U.S. Department of Labor, 
Room N-5507, 200 Constitution Avenue, N.W., Washington, D.C. 20210.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). 
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 requested 
to the Secretary of Labor. Therefore, these notices of proposed 
exemption are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

Standard Bank Employees Profit Sharing Plan (the Plan), Located in 
Hickory Hills, Illinois

[Application No. D-10693]

Proposed Exemption

    The Department is considering granting an 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, 32847, August 10, 1990.)
Part I. Purchases of Residential Mortgage Notes
    If the exemption is granted, 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, as of October 
1, 1998, to the purchases by the Plan of certain residential mortgage 
notes (the Notes) from Standard Bank and Trust Company (the Employer), 
a party in interest with respect to the Plan; provided that the 
following conditions are satisfied:
    (1) An independent qualified fiduciary will decide which Notes will 
be purchased for the Plan;
    (2) Only first mortgage Notes will be purchased by the Plan;
    (3) The Notes which will be purchased by the Plan will have: (a) a 
borrower payment history with the Employer of at least three months; 
(b) a maximum 15 year maturity; and (c) the loan to value ratio of the 
collateral will be at least 150% of the principal amount of the Note;
    (4) If the mortgage loan is an original acquisition mortgage loan, 
the Note will not exceed two-thirds of the lower of the purchase price 
or of the appraised value of the collateral mortgaged by the borrower 
to the Employer to secure the Note;
    (5) If the mortgage loan is a refinancing of the original 
acquisition mortgage loan, the Note will not exceed two-thirds of the 
appraised value of the collateral mortgaged by the borrower to the 
Employer to secure the Note;
    (6) No more than twenty-five percent (25%) of the value of the 
Plan's total assets will be invested in the Notes;
    (7) No more than ten percent (10%) of the value of the Plan's total 
assets will be invested in any one Note or Notes to any one borrower;
    (8) The fees received by the independent fiduciary for serving in 
that capacity with respect to the Plan for the transactions described 
herein, combined with any other fees derived from the Employer or 
related parties,

[[Page 7673]]

will not exceed one percent (1%) of his gross annual income for each 
fiscal year that he continues to serve in the independent fiduciary 
capacity with respect to the transactions described herein; and
    (9) The conditions of Prohibited Transaction Exemption (PTE) 93-71 
(58 FR 51109, September 30, 1993) have been met. PTE 93-71, which 
expired September 30, 1998, provided prospective relief for the 
purchases by the Plan of certain Notes from the Employer.<SUP>1</SUP>
---------------------------------------------------------------------------

    \1\ The applicant represents that, as mandated by PTE 93-71, the 
Employer has filed Form 5330 (Return of Initial Excise Taxes for 
Pension and Profit Sharing Plans) and paid the applicable excise 
taxes for certain past purchases by the Plan of the Notes from the 
Employer which occurred prior to the effective date of PTE 93-71.
---------------------------------------------------------------------------

Part II. Repurchases of Residential Mortgage Notes

    If the exemption is granted, 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 
repurchases of the Notes (the Repurchases) by the Employer: (a) in the 
event of default; (b) if the limitations set forth in Part I (6) and/or 
(7) are exceeded; and (c) at other times as determined by the 
independent fiduciary,<SUP>2</SUP> provided that the Repurchases will 
be at a price which is equal to the greater of the outstanding 
principal balance of the Note plus accrued interest through the date of 
repurchase, or the current fair market value of the Note as determined 
by the independent fiduciary.

    \2\ The Department notes that if a violation of any of the terms 
and conditions of Part I occurs, the exemptive relief provided by 
Part I for purchases of the Notes by the Plan will no longer be 
available. However, the Department further notes that the loss of 
exemption under Part I will not affect the use of Part II to dispose 
of the Notes previously acquired by the Plan pursuant to the 
exemption.
---------------------------------------------------------------------------

EFFECTIVE DATE: The proposed exemption, if granted, will be effective 
as of October 1, 1998.

Summary of Facts and Representations

    1. The Plan is a profit sharing plan, which, as of December 31, 
1997, had approximately 202 participants and beneficiaries. As of 
September 22, 1998, the Plan had $4,233,826 in total assets. The Plan 
trustee and administrator is Standard Bank and Trust Company located at 
2400 West 95th Street, Evergreen Park, Illinois. The Plan is audited on 
an annual basis by Deloitte & Touche, a certified public accounting 
firm. The Employer is a licensed Illinois State bank, and is a 
recognized mortgage lender. The Employer is a member of the Federal 
Deposit Insurance Corporation (FDIC), and is examined annually by the 
Illinois Commissioner of Banks and every eighteen months by the FDIC.
    2. Among its banking activities, the Employer serves as a mortgage 
lender wherein the Employer makes loans to borrowers to purchase a 
residential dwelling unit (RDU) or to refinance mortgage loans on the 
RDU. The borrower signs or guarantees a mortgage note payable to the 
Employer secured with a mortgage or a trust deed and, if appropriate, 
an assignment of rents recorded against the RDU. In the case of a 
purchase or refinancing, an appraisal is obtained from a certified 
independent appraiser establishing the market value of the RDU being 
pledged as collateral for the mortgage note. A title insurance policy 
insuring the first and paramount lien of the mortgage on the RDU is 
obtained from a licensed title insurance company, and hazard insurance 
is also obtained naming the Employer as a mortgagee. In compiling its 
mortgage portfolio, the Employer reviews the following criteria:
    (a) The credit record of the borrower showing that the borrower is 
a good credit risk and has a record of paying bills in a timely manner;
    (b) A verification of the borrower's employment or source of 
income, indicating that the gross income is adequate to service the 
mortgage debt;
    (c) The ratio of mortgage payments to borrower's income; and
    (d) An appraisal by a certified independent appraiser establishing 
the market value of the RDU to be pledged as collateral for the 
mortgage note.
    3. The Employer was granted an individual exemption by the 
Department in 1993 (PTE 93-71), for prospective purchases of certain 
residential mortgage notes (i.e., the Notes) by the Plan from the 
Employer, a party in interest with respect to the Plan. PTE 93-71 
provided temporary relief, and remained effective for a five year 
period beginning on September 30, 1993, which was the date the final 
grant was published in the Federal Register. Thus, PTE 93-71 expired 
September 30, 1998. The applicant requests herein that this proposed 
exemption, if granted, be effective as of October 1, 1998, for the sake 
of continuity, although no new purchases of the Notes by the Plan have 
occurred since September 30, 1998. This proposed exemption contains 
conditions that are substantially similar to the conditions contained 
in PTE 93-71.
    4. The Employer proposes to prospectively continue selling the 
Notes originated by the Employer to the Plan.<SUP>3</SUP>
---------------------------------------------------------------------------

    \3\ The Department notes that the decisions to acquire and hold 
the Notes are governed by the fiduciary responsibility requirements 
of Part 4, Subtitle B, Title I of the Act. In this regard, the 
Department is not proposing relief for any violations of Part 4 
which may arise as a result of the acquisition and holding of the 
Notes by the Plan.
    Furthermore, this exemption, if granted, does not apply to any 
prohibited transactions which may arise as a result of the Employer 
receiving origination fees from the borrowers in connection with the 
Notes which in the future will be purchased by the Plan.
---------------------------------------------------------------------------

    William J. Duffner (Mr. Duffner), CPA, of Evergreen Park, Illinois, 
will serve as an independent fiduciary for the Plan with respect to the 
proposed transactions and will have investment discretion regarding any 
new purchases of the Notes by the Plan. In this regard, Mr. Duffner 
also served as the Plan's independent Fiduciary under PTE 93-71.
    Mr. Duffner represents that he is self-employed as a Certified 
Public Accountant (CPA) as well as a real estate and financial 
consultant. Mr. Duffner and the accounting firm of Duffner & Company, 
P.C., provide a wide range of services including, but not limited to, 
investment analysis for pension and profit sharing plans, Keogh plans 
and individual retirement accounts (IRAs). Mr. Duffner and his firm 
also provide assistance to such plans and other investors in 
residential mortgage and land title matters. Mr. Duffner represents 
that he is unrelated to the Plan and the Employer <SUP>4</SUP> and is 
experienced with mortgage investments and related matters. Mr. Duffner 
states that by virtue of his education and experience he is qualified 
to serve as an independent fiduciary for the Plan for the transactions 
described herein.
---------------------------------------------------------------------------

    \4\ Mr. Duffner does acknowledge that he personally maintains 
deposit and loan accounts with the Employer. However, such accounts 
represent a de minimus amount of the total accounts maintained by 
the Employer.
---------------------------------------------------------------------------

    Mr. Duffner has been advised by legal counsel as to the duties and 
responsibilities of an ERISA fiduciary and assumes those 
responsibilities for the Plan in regard to the transactions described 
herein. Mr. Duffner also states that the fees received by him for 
serving as the Plan's independent fiduciary, combined with any other 
fees derived from the Employer or related parties, will not exceed one 
percent (1%) of his annual gross income from all sources for each 
fiscal year that he serves as independent fiduciary.
    5. As the independent fiduciary, Mr. Duffner will verify 
information, review documents and make computations as

[[Page 7674]]

necessary for each proposed sale of a Note by the Employer to the Plan. 
The Notes will represent original acquisition mortgage loans or 
mortgage loan refinancings. The Notes will be first mortgage Notes and 
will be seasoned for at least three months. The Notes to be offered to 
the Plan will be selected by the Employer. However, Mr. Duffner will 
have discretion with respect to whether a purchase of the Notes will be 
made by the Plan. Prior to any prospective purchase by the Plan, Mr. 
Duffner will review alternative Plan investments. Mr. Duffner will 
determine whether the purchase of a specific Note would be in the best 
interest of the Plan as an investment for the Plan's portfolio. In this 
regard, Mr. Duffner will review Employer's credit and security files 
maintained on the specific mortgage loan evidenced by the Note and any 
other relevant documents to ascertain:
    (a) The borrower's employment or source of income by reference to 
the borrower's financial statement, loan application and tax 
information;
    (b) The ratio of mortgage payments to the borrower's income;
    (c) The credit worthiness and payment history of the borrower by 
reference to credit, employment and financial information;
    (d) That the borrower is not an employee of the Employer and is 
independent of the Plan and the Employer;
    (e) Any required guaranty or assignment of rents;
    (f)(1) If the mortgage loan is an original acquisition mortgage 
loan, that the Note does not exceed two-thirds of the lower of the 
purchase price or the appraised value of the RDU mortgaged by the 
borrower to the Employer to secure the Note; or
    (2) If the mortgage loan is a refinancing of the original 
acquisition mortgage loan, that the Note does not exceed two-thirds of 
the appraised value of the RDU mortgaged by the borrower to the 
Employer to secure the Note;
    (g) That the Note has been seasoned for at least three months and 
is secured by a first mortgage on a single-family RDU and specifies a 
maximum fifteen (15) year maturity with a fixed interest rate per annum 
on the principal balance;
    (h) That a title insurance policy has been issued to the Employer 
insuring the mortgage on the RDU as a first and paramount lien and 
designating the Employer, its successors and assigns as the named 
insured;
    (i) That a hazard insurance policy and flood insurance policy, if 
applicable, have been issued insuring the Employer and its successors 
and assigns as mortgagee of the RDU in an amount not less than the 
principal amount of the Note; and
    (j) That the Employer, as servicer of the Notes, will charge the 
Plan only for its direct costs in connection with such services, as 
permitted by section 408(b)(2) of the Act.
    Mr. Duffner can also require the Employer to repurchase any Notes 
from the Plan to meet liquidity needs of the Plan. Such repurchases 
will be for the greater of the outstanding principal balance of the 
Note plus accrued interest through the date of repurchase, or the 
current fair market value of the Note. The fair market value will be 
determined based on computations described below.
    6. On the date of any sale, Mr. Duffner will also verify that the 
sale price of the Note to the Plan is equal to the current fair market 
value of the Note. In this regard, Mr. Duffner will rely on the 
following method in determining the fair market value of the Note:
    (a) The average yield of comparable RDU mortgage loans will be 
determined based upon the interest rates offered by direct federally 
insured lenders in the Employer's market area. Such interest rate 
information will be obtained from independent published sources or the 
Employer's in-house survey of mortgage loan interest rates offered by 
other direct federally insured lenders in the Employer's market area;
    (b) The fair market value of the Note will then be determined by 
adjusting the principal amount of the Note to a sum which will result 
in a yield equal to the average yield computed by reference to the 
published sources or the Employer's in-house survey referred to in (a) 
above. The current fair market value of the Note may result in a sale 
at a premium or a discount from the outstanding principal balance on 
the Note. However, differences between average market yield and the 
yield on the Note of less than \1/4\% will be considered a de minimis 
variance and no adjustment will be made for such variance; and
    (c) Once the fair market value of the Note is determined, that 
amount will be increased to reflect accrued interest due the Employer 
from the borrower through the date of the sale of the Note to the Plan, 
to arrive at the sale price of the Note.<SUP>5</SUP>
---------------------------------------------------------------------------

    \5\ When determining the purchase price to the Plan of a Note 
originated by the Employer, the independent fiduciary will consider 
prepaid interest in the form of origination fees or points charged 
to the borrower by the Employer and retained by the Employer. 
Origination fees or points will be considered in the comparison of 
the nominal yield of the Note to the average yield in the Employer's 
market area for comparable residential dwelling unit mortgage loans 
offered by other federally insured lenders. The average yield 
figures from other federally insured lenders will include prepaid 
interest in the form of origination fees or points. By making this 
comparison, any prepaid interest in the form of origination fees or 
points retained by the Employer will be considered in the 
computation of the purchase price of the Note to the Plan when the 
purchase price of the Note is adjusted to reflect an average market 
yield.
---------------------------------------------------------------------------

    The Plan will then pay the Employer the sales price in cash. Any 
Note being evaluated by Mr. Duffner would have been originated by the 
Employer for its own portfolio and not as an agent for the Plan. The 
Plan will pay no transfer charges or other costs in relation to these 
transactions. It is represented that any risks and burdens involved in 
the origination, closing, booking and servicing of the mortgage loans 
will be borne by the Employer at no cost to the Plan.
    7. Mr. Duffner as the independent fiduciary will be responsible for 
reviewing the Plan's financial statements and the Employer's compliance 
with the terms of the exemption (if granted) as set forth in this 
document. Mr. Duffner will ensure that the Plan's aggregate investment 
in the Notes does not at any time exceed 25% of the Plan's total 
assets, and that the Plan's investment in the Notes from any one 
borrower does not at any time exceed 10% of the Plan's total assets. In 
this regard, Mr. Duffner will conduct annual reviews of the total 
assets of the Plan in order to determine their fair market value. These 
reviews will take place on each anniversary date from the date that the 
final grant for this proposed exemption is published in the Federal 
Register. If on those occasions, the aggregate fair market value of the 
Notes in the Plan's portfolio exceeds either the 25% or the 10% 
limitation as set forth herein, Mr. Duffner will require the Employer 
to repurchase any Notes as necessary to comply with the 25% and 10% 
limitations. Such repurchases will be completed within three (3) 
business days after each annual review and will be at a price equal to 
the greater of the outstanding principal balance of the Notes plus 
accrued interest through the date of repurchase, or the fair market 
value of the Notes on the date of review. Furthermore, Mr. Duffner will 
monitor the Employer's mortgage loan servicing department to assure the 
receipt of monthly payments of principal and interest due on each Note 
purchased by the Plan, and the remission of such payments to the Plan.
    8. Mr. Duffner will also monitor the Plan's rights in default 
situations. In this regard, the Employer has agreed to repurchase any 
Note (i.e., a Repurchase) which is delinquent for three

[[Page 7675]]

consecutive monthly payments of principal and interest at a price equal 
to the unpaid principal balance on the Note plus accrued interest 
through the date of repurchase. Such Repurchase shall occur not later 
than the last business day of the third consecutive month of uncured 
principal and interest payment default. Also, the Employer will remit 
to the Plan any late fees assessed and collected from the borrower. Mr. 
Duffner represents that a Note in default always has a fair market 
value which is not greater than the unpaid principal balance plus 
accrued interest through the date of repurchase. Therefore, Mr. Duffner 
will not conduct any fair market value computations for the Repurchases 
in the event of default. However, Mr. Duffner will verify the accuracy 
of the sums received by the Plan.
    9. Mr. Duffner has determined that the continued purchase by the 
Plan of the Notes is administratively feasible, protective and in the 
interest of the Plan. Mr. Duffner represents that, due to current 
interest rate levels and other market conditions, Plan assets that are 
invested in debt instruments and certificates of deposits are returning 
substantially lower yields than the Notes. Traditionally, mortgage note 
investments have certain inherent risks, such as the borrower's credit 
risk. However, under the conditions of this proposed exemption, the 
Plan will not be subject to those risks due to the Employer's 
obligation to repurchase from the Plan any Notes in default. In 
addition, the independent fiduciary (i.e., Mr. Duffner) can require the 
Employer to repurchase any Notes from the Plan in order to satisfy the 
Plan's liquidity needs and to maintain compliance with the 25% and 10% 
limitations as set forth herein. Therefore, Mr. Duffner concludes that 
acquisition of the Notes by the Plan will result in higher earnings for 
the Plan with less risks than comparable fixed income investments.
    The Employer and Mr. Duffner understand that the effectiveness of 
the exemption, if granted, will be dependent on the compliance by the 
parties with the terms and conditions of the exemption as set forth 
herein. Furthermore, the Employer and Mr. Duffner understand that in 
the event that unanticipated circumstances reduce the assets of the 
Plan to the extent that a violation of any of the terms and conditions 
of the exemption results, the relief provided by the exemption will no 
longer be available, unless sufficient Repurchases of the Notes are 
made by the Employer within three (3) business days after the annual 
review described in Paragraph 7 above, or within three (3) business 
days of the discovery by Mr. Duffner, as independent fiduciary, of the 
unanticipated event which gave rise to any violation of the terms and 
conditions of the exemption. In such instances, no additional purchases 
of the Notes will be made by the Plan until the conditions of the 
exemption can be met.
    In this regard, the applicant makes a request regarding a successor 
independent fiduciary (the Successor). Specifically, if it becomes 
necessary to appoint the Successor to replace Mr. Duffner, the 
applicant will send a letter to the Department thirty (30) days prior 
to the appointment of the Successor. The letter will specify that the 
Successor has responsibilities, experience and independence similar to 
those of Mr. Duffner. If the Department does not object to the 
Successor, the new appointment will become effective on the 30th day 
after the Department receives such letter.
    10. In summary, the applicant represents that the proposed 
transactions will satisfy the statutory criteria of section 408(a) of 
the Act and section 4975(c)(2) of the Code because:
    (a) The independent fiduciary (i.e., Mr. Duffner) will decide which 
Notes will be purchased for the Plan;
    (b) Only first mortgage Notes will be purchased by the Plan;
    (c) The Notes which will be purchased by the Plan will be seasoned 
for at least three months, will have maximum 15 year maturity, and the 
loan to value ratio of the collateral will be at least 150% of the 
principal amount of the Note;
    (d) In the case of an original acquisition mortgage loan, the Note 
will not exceed two-thirds of the lower of the purchase price or the 
appraised value of the collateral mortgaged by the borrower to the 
Employer to secure the Note;
    (e) In the case of a refinancing of the original acquisition 
mortgage loan, the Note will not exceed two-thirds of the appraised 
value of the collateral mortgaged by the borrower to the Employer to 
secure the Note;
    (f) In the event of a default and/or if the limitations described 
in (g) and (h) below are exceeded, the independent fiduciary (i.e., Mr. 
Duffner) can require the Employer to repurchase any Notes sold to the 
Plan. Such Repurchases will be for the greater of the outstanding 
principal balance of the Notes plus accrued interest through the date 
of Repurchase, or the current fair market value of the Notes;
    (g) No more than twenty-five percent (25%) of the value of the 
Plan's total assets will be invested in the Notes;
    (h) No more than ten percent (10%) of the value of the Plan's total 
assets will be invested in any one Note or Notes to any one borrower;
    (i) Mr. Duffner, as the Plan's independent fiduciary, states that 
the fees received by him for serving as an independent fiduciary to the 
Plan, combined with any other fees derived from the Employer or related 
parties, will not exceed one percent (1%) of his annual gross income 
from all sources for each fiscal year that he serves as the independent 
fiduciary;
    (j) The conditions of PTE 93-71 have been met. PTE 93-71, which 
expired September 30, 1998, provided prospective relief for the 
purchases by the Plan of certain Notes from the Employer.
    (k) The Employer and Mr. Duffner, as the Plan's independent 
fiduciary, understand that the effectiveness of the exemption, if 
granted, will be dependent on the compliance by the parties with the 
terms and conditions of the exemption as set forth herein; and
    (l) The Employer and Mr. Duffner, as the Plan's independent 
fiduciary, understand that in the event that unanticipated 
circumstances reduce the assets of the Plan to the extent that a 
violation of any of the terms and conditions of the exemption results, 
the relief provided by the exemption will no longer be available unless 
sufficient Repurchases of the Notes are made within three (3) business 
days by the Employer, and no additional purchases of the Notes are made 
by the Plan until the conditions of the exemption can be met.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department, 
telephone (202) 219-8883. (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 of disqualified 
person from certain other provisions of the Act and/or 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 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

[[Page 7676]]

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) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
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
    (4) The proposed exemptions, if granted, will be 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, DC, this 9th day of February, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 99-3564 Filed 2-12-99; 8:45 am]
BILLING CODE 4510-29-P