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Secretary of Labor Thomas E. Perez

EBSA (Formerly PWBA) Federal Register Notice

Class Exemption to Permit Certain Transactions Identified in the Voluntary Fiduciary Correction Program [11/25/2002]

[PDF Version]

Volume 67, Number 227, Page 70623-70628

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PENSION AND WELFARE BENEFITS ADMINISTRATION

[Prohibited Transaction Exemption 2002-51; Application No. D-10933]

 
Class Exemption to Permit Certain Transactions Identified in the 
Voluntary Fiduciary Correction Program

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

ACTION: Grant of class exemption.

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SUMMARY: This document contains a final exemption from certain 
prohibited transaction restrictions of the Internal Revenue Code of 
1986 (the Code). The exemption was proposed in conjunction with the 
Department's Voluntary Fiduciary Correction (VFC) Program, the final 
version of which was published in the March 28, 2002, issue of the 
Federal Register. The VFC Program allows certain persons to avoid 
potential civil actions under the Employee Retirement Income Security 
Act of 1974 (ERISA) initiated by the Department and the assessment of 
civil penalties under section 502(l) of ERISA in connection with 
investigation or civil action by the Department. The exemption will 
affect plans, participants and beneficiaries of such plans and certain 
other persons engaging in such transactions.

EFFECTIVE DATE: The exemption is effective November 25, 2002.

FOR FURTHER INFORMATION CONTACT: Karen E. Lloyd, Office of Exemption 
Determinations, Pension and Welfare Benefits Administration, U.S. 
Department of Labor, Room N-5649, 200 Constitution Avenue, NW., 
Washington, DC 20210, (202) 693-8540 (not a toll free number) or 
Cynthia Weglicki, Plan Benefits Security Division, Office of the 
Solicitor, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Washington, DC 20210, (202) 693-5600 (not a toll free number).

SUPPLEMENTARY INFORMATION: On March 28, 2002, the Department published 
a notice in the Federal Register (67 FR 15083) of the pendency of a 
proposed class exemption from the sanctions resulting from the 
application of section 4975(a) and (b) of the Code, by reason of 
section 4975(c)(1)(A) through (E) of the Code. The Department proposed 
the class exemption on its own motion pursuant to 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).\1\
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    \1\ Section 102 of the Reorganization Plan No. 4 of 1978, 5 
U.S.C. App. 1 (1996) generally transferred the authority of the 
Secretary of the Treasury to issue exemptions under section 
4975(c)(2) of the Code to the Secretary of Labor.
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    The notice of pendency gave interested persons an opportunity to 
comment or request a public hearing on the proposal. Two (2) public 
comments were received by the Department. Upon consideration of the 
comments received, the Department has determined to grant the proposed 
class exemption subject to certain modifications. These

[[Page 70624]]

modifications and the comments are discussed below.

Executive Order 12866

    Under Executive Order 12866, the Department must determine whether 
a regulatory action is ``significant'' and therefore subject to the 
requirements of the Executive Order and subject to review by the Office 
of Management and Budget (OMB). Under section 3(f), the order defines a 
``significant regulatory action'' as an action that is likely to result 
in a rule (1) having an annual effect on the economy of $100 million or 
more, or adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    Pursuant to the terms of the Executive Order, it was determined 
that this action is ``significant'' under Section 3(f)(4) of the 
Executive Order. Accordingly, this action has been reviewed by OMB.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3520)(PRA 95), the Department submitted the information collection 
request (ICR) included in the Proposed Class Exemption to Permit 
Certain Transactions Identified in the Voluntary Fiduciary Correction 
to the Office of Management and Budget (OMB) for review and clearance 
at the time the Notice of the Proposed Class Exemption was published in 
the Federal Register (March 28, 2002, 67 FR 15083). OMB approved the 
Notice under OMB control number 1210-0118. The approval will expire on 
November 30, 2003.
    The Department solicited comments concerning the ICR in connection 
with the Notice of Proposed Class Exemption. The Department received no 
comments addressing its burden estimates and no substantive changes 
have been made in the final exemption that would affect the 
Department's earlier burden estimates.
    Agency: Pension and Welfare Benefits Administration, Department of 
Labor.
    Title: Voluntary Fiduciary Correction Program.
    OMB Number: 1210-0118.
    Affected Public: Business or other for-profit; Not-for-profit 
institutions.
    Respondents: 700.
    Frequency of Response: On occasion.
    Responses: 700.
    Estimated Total Burden Hours: 5,710 hours.
    Total Burden Cost (Operating and Maintenance): $272,928.

Discussion of Comments Received

    The Department received two comments regarding the proposed class 
exemption. The commenters requested specific modifications to the 
proposal in the following areas:

1. Notice to Interested Persons

    Both commenters addressed Section IV of the proposed exemption 
which required applicants to provide notice to interested persons of 
the transaction and the method of correction. It was noted that, in 
many cases, applicants who may be subject to the excise taxes under 
section 4975 of the Code will not be the employer whose employees are 
covered by the plan, and may be unrelated to the employer.
    In this regard, one of the commenters stated that, without the 
cooperation of the employer, applicants might find it difficult to 
provide notice to participants and beneficiaries because they would not 
have access to the participants' and beneficiaries' names and 
addresses. The commenter further noted that employers might not be 
willing to provide access to such information due to privacy concerns 
or concerns that receipt of the notice might cause confusion among the 
participants and beneficiaries.
    In the commenter's view, relief under the exemption should not be 
conditioned on the cooperation of an employer or other person that is 
unrelated to the applicant, particularly since the underlying 
prohibited transaction will have been corrected pursuant to the VFC 
Program. The commenter proposed that, in the case of an applicant 
unrelated to the employer whose employees are covered by the plan, the 
exemption permit notice to be provided to the employer or other plan 
fiduciary unrelated to the applicant who was not involved in the 
transaction that is the subject of the VFC Program application, rather 
than each participant and beneficiary. The commenter noted that the 
unrelated fiduciary could then determine whether plan participants and 
beneficiaries should be notified of the underlying transaction and its 
correction under the VFC Program.
    The other commenter stated generally that the notice requirement 
was unnecessary and burdensome, but subsequently clarified that it had 
the same concerns as the first commenter.
    The Department concurs with the commenters' views on the notice 
issue. In this regard, the Department notes that the proposed exemption 
does not contain a definition of interested persons to whom notice must 
be provided. It is the view of the Department that, where an applicant 
is unaffiliated with, and unrelated to, the employer whose employees 
are covered by the plan, the notice requirement will be deemed 
satisfied if the applicant provides notice to a fiduciary of the plan 
who is unrelated to the applicant and all other parties involved in the 
prohibited transaction. In many cases, this may be the employer or an 
administrative committee composed of officers and employees of the 
employer. However, the Department cautions that the notice requirement 
will not be considered satisfied if notice is given to an employer who 
is not unrelated to all parties involved in the prohibited transaction. 
Under no circumstances should plan assets be used to pay for the 
notice.

2. Three Year Rule

    One of the commenters also was concerned about Section II.F. of the 
proposed exemption, which provided that an applicant seeking relief 
under the exemption could not have taken advantage of the relief 
provided under the VFC Program and this exemption for a similar type of 
transaction identified in the current application during the period 
which is three years prior to the submission of the current 
application. The commenter argued that applicants that are service 
providers, as opposed to plan officials, should be permitted to take 
advantage of the VFC Program as often as necessary without regard to 
the three year rule.
    The commenter stated that subjecting service providers to the three 
year rule would not, in all cases, further the rule's purpose of 
ensuring that relief is not provided to fiduciaries who repeatedly make 
the same legal mistake. In contrast to plan sponsors, for example, 
service providers such as broker-dealers, banks and insurance companies 
may engage in numerous transactions with plans each day which could be 
prohibited except for the availability of a statutory or administrative 
exemption. The commenter noted that, if the plan fiduciary directing 
the transaction is relying on an exemption to deal with a party in 
interest, and that fiduciary is factually incorrect on an element of 
the exemption, the broker-dealer may

[[Page 70625]]

engage in many transactions that would need relief under this 
exemption.
    As an example, the commenter explained that a service provider 
could enter into a transaction that otherwise would be prohibited based 
on a fiduciary's representation that the QPAM class exemption (PTE 84-
14) (49 FR 9494, March 13, 1984) applied. The QPAM class exemption 
requires, among other things, that neither the QPAM, an affiliate, nor 
any owner of a 5% or more interest in the QPAM, have been convicted or 
released from imprisonment as a result of certain crimes within the ten 
years immediately preceding the transaction. Information regarding past 
crimes of affiliates and 5% owners of the QPAM is not likely to be 
within the knowledge of the service provider, and the service provider 
must rely on the QPAM for assurance that the condition is satisfied.
    The commenter suggested that Section II.F. be modified to provide 
an exception from the three year rule for applicants that are banks, 
broker-dealers or insurance companies (or affiliates thereof) which did 
not exercise discretionary authority or control to cause the plan to 
enter into the transaction. The commenter proposed that the exception 
be limited to applicants that were parties in interest (including 
fiduciaries) solely by reason of providing services to the plan (or 
solely by reason of a relationship to such service provider described 
in section 3(14)(F), (G), (H), or (I) and the corresponding provisions 
of the Code), and that ``did not believe that an exemption was 
unavailable'' with respect to the transaction. The commenter suggested 
that the applicant must have established written policies and 
procedures reasonably designed to ensure compliance with the prohibited 
transaction rules, and have engaged in periodic monitoring for 
compliance, at the time of the transaction.
    The Department agrees that, in the narrow circumstances described 
above, such service providers should not be excluded from obtaining 
relief under the exemption by the three year rule. Accordingly, the 
Department has modified Section II.F. to clarify that the exemption 
will continue to be available notwithstanding the applicant's inability 
to satisfy the three year rule, provided that:
    [sbull] The applicant was a broker-dealer registered under the 
Securities Exchange Act of 1934, a bank supervised by the United States 
or a State thereof, a broker-dealer or bank subject to foreign 
government regulation, an insurance company qualified to do business in 
a State, or any affiliate thereof;
    [sbull] The applicant was a party in interest (including a 
fiduciary) solely by reason of providing services to the plan or solely 
by reason of a relationship to such service provider described in 
section 3(14)(F), (G), (H) or (I) (and/or the corresponding provisions 
of section 4975 of the Code);
    [sbull] Neither the applicant nor any affiliate (i) was a fiduciary 
(within the meaning of section 3(21)(A) of ERISA) with respect to the 
assets of the plan involved in the transaction, and (ii) used its 
discretion to cause the plan to engage in the transaction;
    [sbull] The individuals acting on behalf of the applicant in 
connection with the transaction had no actual knowledge or reason to 
know that the transaction was not exempt pursuant to a statutory or 
administrative exemption under ERISA and/or the Code; and
    [sbull] Prior to the transaction, the applicant established written 
policies and procedures that were reasonably designed to ensure 
compliance with the prohibited transaction rules and the applicant 
engaged in periodic monitoring for compliance.

3. Participant Loan Repayments

    The Department has made one additional modification to the final 
exemption. As discussed more fully below, the exemption provides relief 
for certain transactions described in the VFC Program, including the 
failure to transmit participant contributions to a pension plan within 
the time frames described in the Department's regulations at 29 CFR 
2510.3-102. Subsequent to the publication of the final VFC Program, the 
Department issued guidance stating that applicants may correct the 
failure to forward participant loan repayments to a plan in a timely 
fashion under the VFC Program in the same manner.\2\ Accordingly, the 
Department revised the language of Section I.A. of the exemption to 
explicitly cover the failure to transmit participant loan repayments to 
a pension plan within a reasonable time after withholding or receipt by 
the employer.
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    \2\ See Frequently Asked Questions on the VFC Program, at http:/
/www.dol.gov/pwba/faqs/faq--vfcp2.html. For the Department's views 
on the time frames for repayment of participant loans to pension 
plans, see the preamble to the final participant contribution 
regulation, 29 CFR section 2510.3-102, published at 61 FR 41220, 
41226 (August 7, 1996). See also DOL Advisory Opinion No. 2002-02A 
(May 17, 2002).
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Description of the Exemption

1. Scope

    The exemption provides relief from the sanctions imposed under 
section 4975(a) and (b) of the Code, by reason of section 4975(c)(1)(A) 
through (E) of the Code, for certain eligible transactions identified 
in the VFC Program. The exemption does not provide relief for any 
transactions identified in the VFC Program that are not specifically 
described as eligible transactions under Section I of the exemption.
    The four eligible transactions described in the exemption are as 
follows:
    (A) The failure to transmit participant contributions to a pension 
plan within the time frames described in the Department's regulations 
at 29 CFR section 2510.3-102 and/or the failure to transmit participant 
loan repayments to a pension plan within a reasonable time after 
withholding or receipt by the employer.
    (B) The making of a loan by a plan at a fair market interest rate 
to a party in interest with respect to the plan.
    (C) The purchase or sale of an asset (including real property) 
between a plan and a party in interest at fair market value.
    (D) The sale of real property to a plan by the employer and the 
leaseback of such property to the employer, at fair market value and 
fair market rental value, respectively.
    The eligible transactions may be illustrated by the following 
examples:

    Example (1): Corporation A sponsors a pension plan for its 
employees. Corporation A borrowed $100,000 from the plan. The loan 
was made at an interest rate no less than that available for a loan 
with similar terms (for example, the amount of the loan, amount and 
type of security, repayment schedule, and duration of loan) 
obtainable in an arm's-length transaction between unrelated parties. 
Example (2): Corporation B sponsors a pension plan for its 
employees. The plan sold a parcel of real property to Corporation B. 
The price Corporation B paid to the plan was the fair market value 
of the property as determined by a qualified independent appraiser 
as of the date of the transaction and reflected in a qualified 
appraisal report. (If there is a generally recognized market for the 
property, such as the New York Stock Exchange, the fair market value 
of the property is the value objectively determined by reference to 
the price on such market on the date of the transaction, and a 
determination by a qualified independent appraiser is not required.)
    Example (3): Corporation C sponsors a pension plan for its 
employees. Corporation C sold a parcel of real property to the plan 
which was simultaneously leased back to Corporation C. The price 
paid by the plan for the property was its fair market value, and

[[Page 70626]]

the rent paid by Corporation C to the plan is the fair market rental 
value, as determined by a qualified independent appraiser and 
reflected in a qualified appraisal report. The terms of the lease 
(for example, rent, duration and allocation of expenses) are not 
less favorable to the plan than those obtainable in an arm's-length 
transaction between unrelated parties.

2. General Conditions

    Section II of the exemption contains general conditions, as 
discussed below, which the Department views as necessary to ensure that 
any transaction covered by the exemption would be in the interests of 
plan participants and beneficiaries, and to support a finding that the 
exemption met the statutory requirements of section 4975(c)(2) of the 
Code.
    With respect to a transaction involving delinquent transmittal of 
participant contributions and/or participant loan repayments to a 
pension plan, the exemption requires that the contributions or 
repayments be transmitted to the pension plan not more than 180 
calendar days from the date the amounts were received by the employer 
(in the case of amounts that a participant or beneficiary pays to an 
employer) or the date the amount otherwise would have been payable to 
the participant in cash (in the case of amounts withheld by an employer 
from a participant's wages).
    Second, the exemption requires that, with respect to the 
transactions described in Sections I.B., I.C. and I.D., the amount of 
plan assets involved in the transaction did not exceed 10 percent of 
the fair market value of all the assets of the plan at the time of the 
transaction. For purposes of this requirement, the 10 percent 
limitation would apply after aggregating the value of a series of 
related transactions.
    Third, under the exemption, the fair market value of any plan asset 
involved in a transaction described in Sections I.C. or I.D. must have 
been determined in accordance with section 5 of the VFC Program. 
Section 5 of the VFC Program requires that the valuation meet the 
following conditions: (1) If there is a generally recognized market for 
the property (e.g., the New York Stock Exchange), the fair market value 
of the asset is the average value of the asset on such market on the 
applicable date, unless the plan document specifies another objectively 
determined value (e.g., the closing price); and (2) if there is no 
generally recognized market for the asset, the fair market value of 
that asset must be determined in accordance with generally accepted 
appraisal standards by a qualified independent appraiser and reflected 
in a written appraisal report signed by the appraiser. For purposes of 
these requirements under the VFC Program, an appraiser is considered 
qualified if the appraiser has met the education, experience and 
licensing requirements that are generally recognized for appraisal of 
the type of asset being appraised. An appraiser is ``independent'' if 
the appraiser is not one of the following, does not own or control any 
of the following, and is not owned or controlled by, or affiliated 
with, any of the following: (i) The prior owner of the asset, if the 
asset was purchased by the plan; (ii) the purchaser of the asset, if 
the asset was or is now being sold by the plan; (iii) any other owner 
of the asset, if the plan is not the sole owner; (iv) a fiduciary of 
the plan; (v) a party in interest with respect to the plan (except to 
the extent the appraiser becomes a party in interest when retained to 
perform this appraisal for the plan); or (vi) the VFC Program 
applicant.
    Fourth, under the exemption, the terms of a transaction described 
in Sections I.B., I.C., or I.D., must have been at least as favorable 
to the plan as the terms generally available in arm's-length 
transactions between unrelated parties.
    Fifth, with respect to all of the eligible transactions, the 
transaction may not have been part of an agreement, arrangement or 
understanding designed to benefit a party in interest. The Department 
notes that the intent of this condition is not to deny a direct benefit 
to the party in interest but, rather, to exclude relief for 
transactions that are part of a broader overall agreement, arrangement 
or understanding designed to benefit parties in interest.
    Sixth, with respect to all of the eligible transactions, the 
applicant may not have taken advantage of the relief provided by the 
VFC Program and the exemption for a similar type of transaction 
identified in the application during the three-year period prior to the 
submission of the application. As modified, however, the final 
exemption contains a limited exception from this condition for service 
providers. Pursuant to the amended Section II.F., a broker-dealer, bank 
or insurance company that is a service provider to a plan would not be 
subject to this condition if it engaged in a prohibited transaction 
described in Section I, provided that: it was not a fiduciary that used 
its discretion to cause the plan to engage in the transaction; 
individuals acting on its behalf in connection with the transaction had 
no actual knowledge or reason to know that the transaction was not 
exempt pursuant to a statutory or administrative exemption under ERISA 
and/or the Code; and, prior to the transaction, it established written 
policies and procedures that were reasonably designed to ensure 
compliance with the prohibited transaction rules and it engaged in 
periodic monitoring for compliance.

3. Compliance with VFC Program

    In addition to compliance with the general conditions set forth 
above, Section III of the exemption requires that the applicant meet 
the requirements set forth in the VFC Program that are applicable to 
the particular transaction. The exemption also requires that the 
applicant have received a no action letter issued by PWBA with respect 
to such transaction, which must be an eligible transaction otherwise 
described in Section I of the exemption. However, the fact that an 
applicant receives a no action letter issued by PWBA should not be 
viewed as a determination by PWBA that the applicant has satisfied all 
of the conditions of the exemption. Each applicant must determine 
whether the pertinent conditions of the exemption have been met.

4. Notice

    Notice under the exemption must be given to interested persons 
within 60 calendar days following the date of the submission of an 
application under the VFC Program to the Department. Plan assets may 
not be used to pay for the notice. The exemption does not specify the 
format or specific content of the notice. However, the notice must 
include an objective description of the transaction and the steps taken 
to correct it, written in a manner reasonably calculated to be 
understood by the average plan participant or beneficiary. The notice 
also must provide for a period of 30 calendar days, beginning on the 
date the notice is distributed, for interested persons to provide 
comments to the appropriate Regional Office of the United States 
Department of Labor, Pension and Welfare Benefits Administration. The 
notice must include the address and telephone number of such Regional 
Office.
    A copy of the notice to interested persons, along with an 
indication of the date on which it was distributed, must be provided to 
the appropriate Regional Office within the same 60-day period following 
the date of the submission of the application. Accordingly, applicants 
under the VFC Program who intend to take advantage of the relief 
provided under this exemption would indicate on the checklist submitted 
as part of the VFC Program application that they will, within 60 
calendar days following the

[[Page 70627]]

date of the submission of the application, provide the Department's 
Regional Office with a copy of the notice to interested persons.
    Notice may be given in any manner that is reasonably calculated, 
taking into consideration the particular circumstances of the plan, to 
result in the receipt of such notice by interested persons, including 
but not limited to posting, regular mail, or electronic mail, or any 
combination thereof.

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 4975(c)(2) of the Code does not relieve a fiduciary or 
other party in interest or disqualified person with respect to a plan 
from certain other provisions of ERISA and the Code, including any 
prohibited transaction provisions to which the exemption does not 
apply, the requirement that all assets of an employee benefit plan be 
held in trust by one or more trustees, and the general fiduciary 
responsibility provisions of ERISA which require, among other things, 
that a fiduciary discharge his or her duties respecting the plan solely 
in the interests of the participants and beneficiaries of the plan and 
in a prudent fashion; 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) The exemption does not extend to transactions prohibited under 
section 4975(c)(1)(F) of the Code.
    (3) In accordance with section 4975(c)(2) of the Code, the 
Department finds that the exemption is administratively feasible, in 
the interests of plans and their participants and beneficiaries, and 
protective of the rights of participants and beneficiaries of such 
plans.
    (4) The exemption is supplemental to, and not in derogation of 
other provisions of ERISA and 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.
    (5) The exemption is applicable to a transaction only if the 
conditions specified in the class exemption are satisfied.

Exemption

    Accordingly, the following exemption is granted under the authority 
of 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).

Section I: Eligible Transactions

    The sanctions resulting from the application of section 4975(a) and 
(b) of the Code, by reason of section 4975(c)(1)(A) through (E) of the 
Code, shall not apply to the following eligible transactions described 
in section 7 of the Voluntary Fiduciary Correction (VFC) Program (67 FR 
15061, March 28, 2002), provided that the applicable conditions set 
forth in Sections II, III and IV are met:
    A. Failure to transmit participant contributions to a pension plan 
within the time frames described in the Department's regulation at 29 
CFR section 2510.3-102, (see VFC Program, section 7.A.1.), and/or the 
failure to transmit participant loan repayments to a pension plan 
within a reasonable time after withholding or receipt by the employer.
    B. Loan at a fair market interest rate to a party in interest with 
respect to a plan. (See VFC Program, section 7.B.1.).
    C. Purchase or sale of an asset (including real property) between a 
plan and a party in interest at fair market value. (See VFC Program, 
sections 7.C.1. and 7.C.2.).
    D. Sale of real property to a plan by the employer and the 
leaseback of the property to the employer, at fair market value and 
fair market rental value, respectively. (See VFC Program, section 
7.C.3.).

Section II: Conditions

    A. With respect to a transaction involving participant 
contributions or loan repayments to pension plans described in Section 
I.A., the contributions or repayments were transmitted to the pension 
plan not more than 180 calendar days from the date the amounts were 
received by the employer (in the case of amounts that a participant or 
beneficiary pays to an employer) or the date the amounts otherwise 
would have been payable to the participant in cash (in the case of 
amounts withheld by an employer from a participant's wages).
    B. With respect to the transactions described in Sections I.B., 
I.C., or I.D., the plan assets involved in the transaction, or series 
of related transactions, did not, in the aggregate, exceed 10 percent 
of the fair market value of all the assets of the plan at the time of 
the transaction.
    C. The fair market value of any plan asset involved in a 
transaction described in Sections I.C. or I.D. was determined in 
accordance with section 5 of the VFC Program.
    D. The terms of a transaction described in Sections I.B., I.C., or 
I.D. were at least as favorable to the plan as the terms generally 
available in arm's-length transactions between unrelated parties.
    E. With respect to any transaction described in Section I, the 
transaction was not part of an agreement, arrangement or understanding 
designed to benefit a party in interest.
    F. (1) With respect to any transaction described in Section I, the 
applicant has not taken advantage of the relief provided by the VFC 
Program and this exemption for a similar type of transaction(s) 
identified in the current application during the period which is three 
years prior to submission of the current application.
    (2) Notwithstanding the foregoing, Section II.F.(1) shall not apply 
to an applicant provided that:
    (a) The applicant was a broker-dealer registered under the 
Securities Exchange Act of 1934, a bank supervised by the United States 
or a State thereof, a broker-dealer or bank subject to foreign 
government regulation, an insurance company qualified to do business in 
a State, or an affiliate thereof;
    (b) The applicant was a party in interest (including a fiduciary) 
solely by reason of providing services to the plan or solely by reason 
of a relationship to such service provider described in section 
3(14)(F), (G), (H) or (I) (and/or the corresponding provisions of 
section 4975 of the Code);
    (c) Neither the applicant nor any affiliate (i) was a fiduciary 
(within the meaning of section 3(21)(A) of ERISA) with respect to the 
assets of the plan involved in the transaction and (ii) used its 
discretion to cause the plan to engage in the transaction;
    (d) Individuals acting on behalf of the applicant had no actual 
knowledge or reason to know that the transaction was not exempt 
pursuant to a statutory or administrative exemption under ERISA and/or 
the Code; and
    (e) Prior to the transaction, the applicant established written 
policies and procedures that were reasonably designed to ensure 
compliance with the prohibited transaction rules and the applicant 
engaged in periodic monitoring for compliance.

Section III: Compliance with VFC Program

    A. The applicant has met all of the applicable requirements of the 
VFC Program.

[[Page 70628]]

    B. PWBA has issued a no action letter to the applicant pursuant to 
the VFC Program with respect to a transaction described in Section I.

Section IV: Notice

    A. Written notice of the transaction(s) for which the applicant is 
seeking relief pursuant to the VFC Program and this exemption, and the 
method of correcting the transaction, was provided to interested 
persons within 60 calendar days following the date of the submission of 
an application under the VFC Program. A copy of the notice was provided 
to the appropriate Regional Office of the United States Department of 
Labor, Pension and Welfare Benefits Administration within the same 60-
day period, and the applicant indicated the date upon which notice was 
distributed to interested persons. Plan assets were not used to pay for 
the notice. The notice included an objective description of the 
transaction and the steps taken to correct it, written in a manner 
reasonably calculated to be understood by the average plan participant 
or beneficiary. The notice provided for a period of 30 calendar days, 
beginning on the date the notice was distributed, for interested 
persons to provide comments to the appropriate Regional Office. The 
notice included the address and telephone number of such Regional 
Office.
    B. Notice was given in a manner that was reasonably calculated, 
taking into consideration the particular circumstances of the plan, to 
result in the receipt of such notice by interested persons, including 
but not limited to posting, regular mail, or electronic mail, or any 
combination thereof. The notice informed interested persons of the 
applicant's participation in the VFC Program and intention of availing 
itself of relief under the exemption.

    Signed at Washington, DC, this 11th day of November, 2002.
Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 02-29799 Filed 11-22-02; 8:45 am]

BILLING CODE 4510-29-P