Skip to page content
Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; Premier Funding Group, Inc.; Employees Profit Sharing Plan, et al [Notices] [07/27/1999]

Grant of Individual Exemptions; Premier Funding Group, Inc.; Employees Profit Sharing Plan, et al [07/27/1999]

[PDF Version]

Volume 64, Number 143, Page 40626-40628

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

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 99-30; Exemption Application No. D-
10669, et al.]

 
Grant of Individual Exemptions; Premier Funding Group, Inc.; 
Employees Profit Sharing Plan, et al

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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

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.

Premier Funding Group, Inc. Employees Profit Sharing Plan (the P/S 
Plan) and the Money Purchase Pension Plan for Employees of Premier 
Funding Group, Inc. (the M/P Plan, collectively; the Plans) Located in 
Arlington, Texas

[Prohibited Transaction Exemption 99-30; Exemption Application Nos. D-
10669 and D-10670]

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 February 1, 1999, to a lease (the Lease) of 
certain second-floor space (the Leased Premises) in a building by the 
Plans to LM Holdings, Inc., a party in interest with respect to the 
Plans; provided that the following conditions are satisfied:
    (a) All terms and conditions of the Lease are at least as favorable 
to the Plans as those which the Plans could obtain in an arm's-length 
transaction with an unrelated party;
    (b) The fair market rental amount for the Lease has been determined 
by an independent qualified appraiser;
    (c) Each Plan's allocable portion of the fair market value of both 
the Leased Premises and the building where the Leased Premises are 
located represents no more than 20 percent (20%) of the total assets of 
each Plan throughout the duration of the Lease;
    (d) The interests of the Plans under the Lease are represented by 
an independent, qualified fiduciary (the Independent Fiduciary);
    (e) The fees received by the Independent Fiduciary, combined with 
any other fees derived from any related parties, will not exceed 1% of 
that person's annual income for each fiscal year that such person 
continues to serve in the independent fiduciary capacity with respect 
to the Lease;
    (f) The Independent Fiduciary evaluated the Lease and deemed it to 
be administratively feasible, protective and in the best interest of 
the Plans;
    (g) The Independent Fiduciary monitors the terms and the conditions 
of the exemption and the Lease throughout its duration, and takes 
whatever action is necessary to protect the Plans' rights;
    (h) At the discretion of the Independent Fiduciary, the Lease can 
be extended for two additional five-year terms, provided that the 
Independent Fiduciary requires independent appraisals of the Leased 
Premises to be performed at the time of each extension of the Lease so 
as to ensure that LM Holdings continues to pay fair market

[[Page 40627]]

rent, and such rent is not less that either the initial base rent or 
the amount paid during the most recent annual term; and
    (i) Within 90 days of publication in the Federal Register of this 
exemption, LM Holdings files with the Internal Revenue Service (IRS) 
Form 5330 (Return of Initial Excise Taxes for Pension and Profit 
Sharing Plans) and pays all excise taxes applicable under section 
4975(a) of the Code that are due by reason of the existence of the 
Lease as a prohibited transaction prior to February 1, 1999.

EFFECTIVE DATE: This exemption is effective as of February 1, 1999.

    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 June 3, 1999 at 64 FR 
29906.

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

The Unaka Company, Incorporated Employees' Profit Sharing Plan and 
Trust (the Plan) Located in Greenville, Tennessee

[Prohibited Transaction Exemption 99-31; Application No. D-10722]

Exemption

    The restrictions of sections 406(a)(1)(A) through (D), 406(b)(1), 
and 406(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: <SUP>1</SUP>
---------------------------------------------------------------------------

    \1\ For purposes of this exemption, references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
---------------------------------------------------------------------------

    (a) The assignment (the Assignment) by the Plan to the Unaka 
Company, Incorporated (Unaka), the sponsoring employer and a party in 
interest with respect to the Plan, of any and all claims, demands, and/
or causes of action which the Plan may have against certain members of 
the Plan Administrative Committee (the PAC) and other involved parties 
(collectively, the Responsible Fiduciaries) for breach of fiduciary 
duty under the Act, during the period from July 1, 1996 to July 31, 
1998;
    (b) In exchange for the Assignment, described in paragraph (a), 
above, the interest-free, non-recourse loan (the Loan) by Unaka to the 
Plan in an amount equal to the difference between $413 and the fair 
market value per share for the common stock of Unaka (the Stock) held 
by the Plan, in connection with the sale of such Stock by the Plan to 
Unaka, pursuant to the statutory exemption, as set forth in section 
408(e) of the Act; <SUP>2</SUP>
---------------------------------------------------------------------------

    \2\ The Department, herein, expresses no opinion as to the 
applicability of the statutory exemption provided by section 408(e) 
of the Act to the sale by the Plan of its Unaka Stock to Unaka or as 
to whether the conditions set forth in such statutory exemption are 
satisfied in the execution of such transaction. Further, the 
Department, herein, is offering no relief for transactions other 
than the transactions described in this exemption.
---------------------------------------------------------------------------

    (c) The possible repayment of such Loan to Unaka from the cash 
proceeds of the recovery, if any, from a judgment or settlement of the 
litigation against the Responsible Fiduciaries;
    (d) The interest-free, non-recourse extension of credit (the 
Extension of Credit) by Unaka to the Plan of certain expenses arising 
out of the litigation against the Responsible Fiduciaries, effective as 
of, May 1, 1999, the date when expenses incurred by the Plan in 
bringing such litigation were first paid by Unaka; and
    (e) The possible receipt by Unaka of reimbursement of such 
litigation expenses from the cash proceeds of the recovery, if any, 
from a judgment or settlement of the litigation against the Responsible 
Fiduciaries; provided that the following conditions are satisfied:
    (1) The Plan will pay no interest in connection with the Loan or 
the Extension of Credit;
    (2) None of the assets of the Plan will be pledged to secure either 
the amount of the Loan or the amount of the Extension of Credit;
    (3) Repayment to Unaka of the amount of the Loan and reimbursement 
to Unaka of the amount of the Extension of Credit shall be restricted 
solely to the cash proceeds of the recovery, if any, from a judgment or 
settlement of the litigation against the Responsible Fiduciaries;
    (4) To the extent the amount of the cash proceeds, if any, from any 
judgment or settlement of the litigation against the Responsible 
Fiduciaries is equal to or less than the amount due to Unaka as 
repayment for the Loan and reimbursement of the Extension of Credit, 
the Plan shall not be liable to Unaka for any amount;
    (5) To the extent the cash proceeds, if any, from any judgment or 
settlement of the litigation against the Responsible Fiduciaries 
exceeds the total amount of the Loan, plus the amount of the Extension 
of Credit, such excess amount will be allocated to the accounts of the 
participants of the Plan; with the exception that no such allocation 
will be made to the account of Robert Austin, Jr. in the Plan;
    (6) The transactions which are the subject of this exemption do not 
involve any risk of loss either to the Plan or to any of the 
participants and beneficiaries of the Plan;
    (7) The Plan will not incur any expenses as a result of the 
transactions which are the subject of this exemption;
    (8) Notwithstanding the Assignment by the Plan of its rights 
against the Responsible Fiduciaries, the Plan does not release any 
claims, demands, and/or causes of action which it may have against 
Unaka and/or its affiliates;
    (9) All of the terms of the transactions are at least as favorable 
to the Plan as those which the Plan could obtain in similar 
transactions negotiated at arm's-length with unrelated third parties;
    (10) The Plan receives no less than the fair market value for the 
Assignment, as of the date of the closing on the transfer of the 
Assignment;
    (11) Prior to the Plan's entering the transactions, an independent, 
qualified fiduciary (the I/F), who is acting on behalf of the Plan and 
who is independent of Unaka and its affiliates, reviews, negotiates, 
and approves the terms and conditions of the Loan, the Assignment, and 
the Extension of Credit and determines that such transactions are 
prudent, administratively feasible, in the interest of the Plan and its 
participants and beneficiaries, and protective of the participants and 
beneficiaries of the Plan;
    (12) Throughout the duration of the transactions, the I/F monitors 
the prosecution of the lawsuit against the Responsible Fiduciaries, 
including but not limited to monitoring all costs and fees incurred in 
connection with any litigation related to the transactions, monitors 
the division of the recovery, if any, from any judgment or settlement 
of the litigation against the Responsible Fiduciaries to ensure that 
the Plan receives the portion to which it is entitled and that the 
Plan's interests are served, and monitors the terms and conditions of 
the transactions to ensure that such terms and conditions are at all 
times satisfied;
    (13) The I/F, acting on behalf of the Plan, shall have final 
approval authority over any settlement of any legal proceedings against 
the Responsible Fiduciaries brought pursuant to the terms of the 
Assignment; and
    (14) In the event the I/F resigns, is removed, or for any reason is 
unable to serve, including but not limited to the death or disability 
of such I/F, or if at any time such I/F does not remain independent of 
Unaka and its affiliates, such I/F will be replaced by a successor: (i) 
Who is appointed immediately upon the occurrence of such event; (ii) 
who is independent of Unaka and its affiliates; (iii) who is qualified 
to serve as the I/

[[Page 40628]]

F; and (iv) who assumes all the duties and responsibilities of the 
predecessor I/F.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department of 
Labor (the Department) invited all interested persons to submit written 
comments and requests for a hearing on the proposed exemption within 
forty-five (45) days of the date of the publication of the Notice in 
the Federal Register on June 3, 1999. All comments and requests for a 
hearing were due by July 19, 1999.
    During the comment period, the Department received no requests for 
a hearing. However, on June 16, 1999, the Department did receive a 
favorable comment letter from one commentator. In this regard, the 
commentator noted that the exemption would move the Plan away from the 
internal family lawsuits and the transactions posed no risk of loss to 
the Plan or any of the participants.
    After giving full consideration to the entire record, including the 
written comment from the commentator, the Department has decided to 
grant the exemption. In this regard, the comment letter submitted to 
the Department has been included as part of the public record of the 
exemption application. The complete application file, including all 
supplemental submissions received by the Department, is made available 
for public inspection in the Public Documents Room of the Pension 
Welfare Benefits Administration, Room N-5638, U. S. Department of 
Labor, 200 Constitution Avenue, NW, Washington, DC 20210.
    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 June 3, 1999, at 64 FR 
29908.

FURTHER INFORMATION CONTACT: Angelena C. Le Blanc 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 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 accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 22nd day of July, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 99-19153 Filed 7-26-99; 8:45 am]
BILLING CODE 4510-29-P