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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; Standard Bank Employees Profit Sharing Plan, et al. [Notices] [05/06/1999]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; Standard Bank Employees Profit Sharing Plan, et al. [05/06/1999]

[PDF Version]

Volume 64, Number 87, Page 24422-24424

[[Page 24422]]

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 99-16; Exemption Application No. D-
10693, et al.]

 
Grant of Individual Exemptions; Standard Bank Employees Profit 
Sharing Plan, 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, DC. 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.

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

[Prohibited Transaction Exemption 99-16; Exemption Application No. D-
10693]

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, 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, 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>
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    \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.
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Part II. Repurchases of Residential Mortgage Notes
    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.
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EFFECTIVE DATE: This exemption is effective as of October 1, 1998.
    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 February 16, 
1999 at 64 FR 7672.

Written Comments

    The Department received one written comment with respect to the 
Notice and no requests for a public hearing. The comment was filed by 
the Employer and states that paragraph 1 of the Summary of Facts and 
Representations contained in the Notice incorrectly states that 
Deloitte & Touche are the accountants for the Plan. The Plan 
accountants are Desmond & Ahern, Ltd. Certified Public Accountants.

[[Page 24423]]

    The Department concurs with this correction.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department, 
telephone (202) 219-8883. (This is not a toll-free number.)

Plumbers and Pipefitters National Pension Fund (the Pension Plan) 
and Pipefitters Local No. 211 Joint Educational Trust (the Welfare 
Plan) (Collectively, the Plans) Located in Alexandria, VA and 
Houston, TX, respectfully

[Prohibited Transaction Exemption No. 99-17 Application Nos. D-10700 
and L-10709]

Exemption

    The restrictions of sections 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 to 
the sale (the Sale) of certain real property (the Property) by the 
Pension Plan to the Welfare Plan, a party in interest with respect to 
the Pension Plan; provided the following conditions are satisfied:
    (A) The terms and conditions of the transaction are no less 
favorable to the Pension Plan and the Welfare Plan than those which 
either the Pension Plan or the Welfare Plan would receive in an arm's-
length transaction with an unrelated party;
    (B) The Sale is a one-time transaction for cash;
    (C) The Pension Plan and the Welfare Plan incur no expenses, fees, 
or commissions from the Sale other than their own respective appraisal, 
recording, and legal expenses;
    (D) The Welfare Plan pays as consideration for the Property no more 
than the fair market value of the Property as determined by a 
qualified, independent appraiser on the date of the Sale;
    (E) The Pension Plan sells the Property for a price that is not 
less than the fair market value of the Property as determined by 
qualified, independent appraiser on the date of the Sale; and
    (F) The fiduciaries for the Pension Plan and the Welfare Plan, 
respectfully, will enforce the terms of the exemption.
    Written Comments: The Department received five written comments 
which were found to be not relevant to the transaction; and therefore, 
the Department has determined to grant the exemption as proposed.
    Correspondence received from the applicant's representative during 
the comment period stated that the Welfare Plan is interested in 
purchasing the Property in part for future expansion. Initially, upon 
purchase, the Welfare Plan will use the Property for parking. 
Thereafter, it is anticipated that the fiduciaries of the Welfare Plan 
will contract for a study regarding the feasibility of constructing new 
classroom facilities.
    In this regard, the Department notes that the Act's standards of 
fiduciary conduct will apply to the purchase and ultimate development 
of the Property. Section 404(a)(1) of the Act requires that a fiduciary 
discharge his or her duties with respect to a plan solely in the 
interest of the participants and beneficiaries and with the care, 
skill, prudence and diligence under the circumstances then prevailing 
that a prudent person acting in a like capacity and familiar with such 
matters would use in the conduct of a enterprise of a like character 
and with like aims. Accordingly, the fiduciaries of the Welfare Plan 
must act ``prudently'' with respect to the decision to purchase the 
Property, as well as to the ultimate development of the Property 
(including where relevant, the determination as to whether to develop 
the Property, the types of improvements that are appropriate and the 
Plan's ability to finance any such improvements). The granting of this 
exemption should not be viewed as an endorsement by the Department of 
the Plan's subsequent use of such Property. Finally, we note that, if 
the decision by the fiduciaries to purchase and develop the Property is 
not prudent, the fiduciaries would be liable for any loss resulting 
from such breach even though the purchase of the Property was the 
subject of an administrative 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 January 27, 1999, at 64 
FR 4142.

FOR FURTHER INFORMATION CONTACT: Mr. C. E. Beaver of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

State Bankshares Inc. 401(k) Profit Sharing Plan (the Plan) Located 
in Fargo, North Dakota

[Prohibited Transaction Exemption 99-18; Exemption Application No. D-
10703]

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 proposed sale by the Plan of certain limited 
partnership interests (the Interests) to Northern Capital Trust Company 
(Northern), the Plan's trustee and a party in interest with respect to 
the Plan, for $93,552.93 in cash, provided the following conditions are 
satisfied: (a) The sale is a one-time transaction for cash; (b) no 
commissions are charged in connection with the transaction; (c) the 
Plan receives not less than the fair market value of the Interests at 
the time of the transaction; and (d) the fair market value of the 
Interests is determined by a qualified entity independent of the Plan 
and of Northern.
    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 March 8, 1999 at 64 FR 
11062.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

vonRoll isola Savings Plan (the Plan) Located in Schenectady, New 
York

[Prohibited Transaction Exemption 99-19; Exemption Application No. D-
10729]

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 making by State Street Bank and Trust 
Company (the Bank) of interest-free advances of cash (the Advances) to 
the Plan during the period from July 8, 1997 through June 22, 1998, in 
the aggregate amount of $824,812.60; and (2) the repayment of the 
Advances by the Plan, without interest, on June 22, 1998, provided the 
following conditions were satisfied:
    (a) No interest or expense was incurred by the Plan in connection 
with the Advances;
    (b) The proceeds of the Advances were used only to facilitate the 
payment of benefits (including participant loans and in-service 
withdrawals) to Plan participants, and to facilitate the making of 
investment transfers elected by Plan participants;
    (c) The Advances were unsecured;
    (d) The Plan participants who remained invested in the Plan's 
stable value fund, which consisted primarily of a Group Flexible 
Annuity Contract (the GIC) from the Travelers Insurance Company 
(Travelers), continued to receive the full contract rate on the full 
amount of the GIC;
    (e) The Plan's sponsor was notified of the Advances;

[[Page 24424]]

    (f) The repayment of the Advances was made at the direction of the 
Plan's sponsor and was restricted to amounts received from the proceeds 
of the installment payments made by Travelers under the GIC, and no 
other plan assets were used for that purpose;
    (g) The Bank will maintain or cause to be maintained for a period 
of six years from the date of the granting of the exemption proposed 
herein the records necessary to enable the persons described in 
paragraph (h) 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 the Bank, the 
records are lost or destroyed prior to the end of the six year period; 
and
    (2) No party in interest, other than the Bank, 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 (h); and
    (h)(1) Except as provided in paragraph (h)(2) and notwithstanding 
any provisions of subsections (a)(2) and (b) of section 504 of the Act, 
the records referred to in paragraph (g) 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 the Plan, or any duly authorized employee or 
representative of such fiduciary; and
    (C) Any participant or beneficiary of the Plan or duly authorized 
representative of such participant or beneficiary;
    (2) None of the persons described in paragraph (h)(1)(B) and 
(h)(1)(C) shall be authorized to examine trade secrets of the Bank or 
commercial or financial information which is privileged or 
confidential.
    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 March 4, 1999 at 64 FR 
10503.

EFFECTIVE DATES: This exemption is effective from July 8, 1997 through 
June 22, 1998.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz 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;
    (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, DC, this 28th day of April, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 99-11004 Filed 5-5-99; 8:45 am]
BILLING CODE 4510-29-P `