Federal Register / Vol. 76, No. 87 / Thursday, May 5, 2011 / Notices 25711 

information between the federal and 

state partners to enhance the ability of 

the program to reflect the joint 

commitment to performance excellence 

and client-centered services. As part of 

UI Performs, a comprehensive 

performance management system 

implemented in 1995 for the UI 

program, the SQSP is the principal 

vehicle that state UI agencies use to 

plan, record and manage program 

improvement efforts as they strive for 

excellence in service. The SQSP, which 

serves as the State Plan for the UI 

program, also serves as the grant 

document through which states receive 

federal UI administrative funding. The 

statutory basis for the SQSP is Title III, 

Section 302 of the Social Security Act, 

which authorizes the Secretary of Labor 

to provide funds to administer the UI 

programs, and Sections 303 (a) (8) and 

(9) which govern the expenditures of 

those funds. The SQSP represents an 

approach to tie program performance 

with the budget and planning process. 

II. Review Focus 

The Department of Labor is 

particularly interested in comments 

which: 

• Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information, 

including the validity of the 

methodology and assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

e.g., permitting electronic submissions 

of responses. 

ETA proposes to extend this 

information collection. The 

Department’s information collection 

authority for SQSP is under Office of 

Management and Budget (OMB) number 

1205–0132. Currently, the Employment 

and Training Administration is 

soliciting comments concerning the 

extension of and modification to the ET 

Handbook No. 336. 

States will continue to use the State 

Plan Narrative to provide a general 

summary of the UI program in the state. 

Additionally, states are to include in the 

Narrative: (1) Performance in 

comparison to the Government 

Performance and Results Act (GPRA) 

goals; (2) results of customer satisfaction 

surveys (optional); and (3) actions 

planned to correct deficiencies 

regarding UI programs and reporting 

requirements. Actions planned to 

correct deficiencies for Secretary 

Standards, Core Measures, and the Data 

Validation (DV) program are expected to 

be addressed in corrective action plans. 

On April 13, 2011, OMB approved a 

non-substantive change to 1205–0132, 

requiring that all states include in their 

SQSP submissions a corrective action 

plan to reduce and recover improper 

payments. Comment is encouraged on 

this recent change as well as on the 

1205–0132 data requirements in general. 

The Department will provide each 

state workforce agency with its statespecific root causes for its improper 

payments, based on BAM survey results. 

The SQSP Handbook No. 336 includes 

an action plan for each state to 

complete. The state action plan will 

include the following items: 

• Strategies to reduce root causes, 

including recovery of these improper 

payments; 

• Timeline, expected targets and 

measures; and 

• Type and source of resources 

dedicated to accomplish the action plan. 

III. Current Actions 

Type of Review: extension of current 

collection. 

Title: Unemployment Insurance State 

Quality Service Plan (SQSP). 

OMB Number: 1205–0132. 

Affected Public: State Workforce 

Agencies. 

Total Annual Respondents: 53. 

Reporting Frequency: 13 annual 

reports and 4 quarterly reports per year 

per respondent. 

Total Annual Responses: 901. 

Average Time per Response: 3.37 

hours. 

Estimated Total Annual Burden 

Hours: 3036 hours. 

Total Annual Burden Cost for 

Respondents: $0. 

Comments submitted in response to 

this comment request will be 

summarized and/or included in the 

request for Office of Management and 

Budget approval of the information 

collection request; they will also 

become a matter of public record. 

Signed at Washington, DC, this 29th day of 

April 2011. 

Jane Oates, 

Assistant Secretary, Employment and 

Training Administration. 

[FR Doc. 2011–10937 Filed 5–4–11; 8:45 am] 

BILLING CODE 4510–FW–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

Proposed Exemptions from Certain 

Prohibited Transaction Restrictions 

AGENCY: Employee Benefits Security 

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 (ERISA or the Act) and/or 

the Internal Revenue Code of 1986 (the 

Code). This notice includes the 

following proposed exemptions: D– 

11513, North Trust Corporation; D– 

11634, The United Brotherhood of 

Carpenters Pension Fund (the Fund); D– 

11639, Wolverine Bronze Profit Sharing 

Plan and Trust (the Plan); and L–11651 

and L–11652, Verizon Communications, 

Inc. (Verizon and Cellco Partnership, 

doing business as Verizon Wireless 

(Verizon Wireless; collectively, the 

Applicants) et al.] 

DATES: All interested persons are invited 

to submit written comments or requests 

for a hearing on the pending 

exemptions, unless otherwise stated in 

the Notice of Proposed Exemption, 

within 45 days from the date of 

publication of this Federal Register 

Notice. 

ADDRESSES: 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. 

All written comments and requests for 

a hearing (at least three copies) should 

be sent to the Employee Benefits 

Security Administration (EBSA), Office 

of Exemption Determinations, Room N– 

5700, U.S. Department of Labor, 200 

Constitution Avenue, NW., Washington, 

DC 20210. Attention: Application No. 

lll, stated in each Notice of 

Proposed Exemption. Interested persons 

are also invited to submit comments 

and/or hearing requests to EBSA via email or FAX. Any such comments or 

requests should be sent either by e-mail 

to: moffitt.betty@dol.gov, or by FAX to 

(202) 219–0204 by the end of the 

scheduled comment period. The 


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1For purposes of this proposed exemption, 

references to section 406 of ERISA should be read 

to refer also to the corresponding provisions of 

section 4975 of the Code. 

2The Department notes that ERISA’s general 

standards of fiduciary conduct would apply to the 

transactions described herein. In this regard, section 

404 requires, among other things, that a fiduciary 

discharge his duties respecting a plan solely in the 

interest of the plan’s participants and beneficiaries 

and in a prudent manner. Accordingly, a plan 

fiduciary must act prudently with respect to, among 

other things, the decision to sell the ARS to 

Northern for the par value of the ARS. The 

Department further emphasizes that it expects plan 

fiduciaries, prior to entering into any of the 

transactions, to fully understand the risks 

associated with this type of transaction, following 

disclosure by Northern of all the relevant 

information. 

applications for exemption and the 

comments received will be available for 

public inspection in the Public 

Documents Room of the Employee 

Benefits Security Administration, U.S. 

Department of Labor, Room N–1513, 

200 Constitution Avenue, NW., 

Washington, DC 20210. 

Warning: If you submit written 

comments or hearing requests, do not 

include any personally-identifiable or 

confidential business information that 

you do not want to be publiclydisclosed. All comments and hearing 

requests are posted on the Internet 

exactly as they are received, and they 

can be retrieved by most Internet search 

engines. The Department will make no 

deletions, modifications or redactions to 

the comments or hearing requests 

received, as they are public records. 

SUPPLEMENTARY INFORMATION: 

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). 

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, 5 U.S.C. App. 1 (1996), 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. 

Northern Trust Corporation 

Located in Chicago, IL 

[Application No. D–11513] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of ERISA 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). 

Section I. Transactions 

If the proposed exemption is granted, 

the restrictions of section 406(a)(1)(A) 

and (D) and section 406(b)(1) and (2) of 

ERISA and the sanctions resulting from 

the application of section 4975 of the 

Code, by reason of section 4975(c)(1)(A), 

(D), and (E) of the Code, shall not apply, 

effective October 31, 2008, to the sale 

(the Sale) by a Plan (as defined in 

Section III(e)) of an Auction Rate 

Security (ARS, as defined in Section 

III(c)) to Northern Trust Corporation or 

an affiliate thereof (Northern), if the 

conditions of Section II are met.1

Section II. Conditions 

(a) The Plan acquired the ARS in 

connection with brokerage or advisory 

services provided by Northern to the 

Plan; 

(b) The last auction for the ARS was 

unsuccessful; 

(c) The Sale is made pursuant to a 

written offer by Northern (the Offer) 

containing all of the material terms of 

the Sale, in which the Plan would have 

the opportunity to sell the ARS but 

would be under no obligation to do so, 

and would include but is not limited to 

the following: 

(i) Northern will distribute each Offer 

to its eligible customers, marked, or 

otherwise prepared in a manner 

reasonably designed to prominently 

indicate to the recipient the subject 

matter, importance, and time-sensitivity 

of the information provided; 

(ii) Acceptance of an Offer would 

cause Northern to purchase the eligible 

ARS at the next applicable coupon 

interest payment date as described 

therein. Purchase dates may vary 

depending on when an Offer is accepted 

and when the next coupon interest 

payment date for such eligible ARS 

occurs; 

(iii) Acceptance of the Offer could be 

withdrawn at any time until three 

business days prior to the payment date; 

and 

(iv) The Offer will comply with ‘‘plain 

English’’ standards and will include: A 

reference to a Web site containing a 

description of the eligibility criteria 

used by Northern; a reference to where 

the Plan fiduciary can find a list of 

eligible ARS held in the account 

(including the amount and other 

identifying information); the 

background of the Offer; the methods 

and timing by which eligible customers 

may accept the Offer; the manner of 

determining the purchase dates for 

eligible ARS pursuant to the Offer; the 

timing of payment for eligible ARS 

purchased pursuant to the Offer; the 

methods and timing by which a 

customer may elect to withdraw its 

acceptance of the Offer; the expiration 

date of the Offer; a suggestion that 

eligible customers consult their tax 

advisors to determine the tax 

consequences, if any, of accepting the 

Offer and to ensure that accounting and 

financial reporting complies with 

applicable accounting guidance; and 

how to obtain additional information 

concerning the Offer; 

(d) The Sale is a one-time transaction 

for no consideration other than cash 

payment against prompt delivery of the 

ARS; 

(e) The sales price for the ARS is 

equal to the par value of the ARS, plus 

any accrued but unpaid interest or 

dividends as applicable, as of the date 

of the Sale; 

(f) The Plan does not waive any rights 

or claims in connection with the Sale; 

(g) The decision to accept the Offer or 

retain the ARS is made by an 

Independent Fiduciary (as defined in 

Section III(d)).2 Notwithstanding the 

foregoing, in the case of an individual 

retirement account (IRA) which is 

beneficially owned by an employee, 

officer, director or partner of Northern, 

the decision to accept the Offer or retain 

the ARS may be made by such 

employee, officer, director, or partner; 

(h) Neither Northern nor an affiliate 

thereof exercises investment discretion 

or renders investment advice, within the 

meaning of 29 CFR 2510.3–21(c), in 

connection with the decision to sell or 

retain the ARS; 

(i) The Plan does not pay any 

commissions or any other transaction 

costs with respect to the Sale; 

(j) The Sale is not part of an 

arrangement, agreement, or 

understanding designed to benefit a 

party in interest or disqualified person 

to the Plan; 


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3ARS may be issued as either debt or preferred 

stock. In the case of debt, they generally have a 

long-term nominal maturity and an interest rate that 

is reset through a Dutch Auction process. In the 

case of preferred stock, they generally have no 

maturity and a dividend that is reset through a 

Dutch Auction process. A Dutch Auction is a 

competitive process used to determine rates on each 

auction date. Bids are submitted to the auction 

agent by the broker-dealer on behalf of the investors 

interested in selling their securities. The auction 

agent matches bids with securities offered by the 

bondholders and the winning bid is the highest 

price (lowest interest rate or dividend) at which the 

auction clears. That means the lowest interest rate 

at which the total number of securities demanded 

equals the total number auctioned. If the market 

does not clear, then there is a failed auction, and 

the securities may not be sold in their entirety. 

4 In a Dutch Auction, prospective investors may 

submit a bid that specifies the par amount of the 

securities they wish to acquire and the minimum 

interest rate or dividend they are willing to accept. 

Existing holders may submit (i) a hold order, which 

means they want to hold their position at whatever 

rate is set via the auction, (ii) a hold at rate order, 

which means they want to hold their position but 

only if the rate is set at or above their specified 

level, or (iii) a sell order, which means they wish 

to exit their position, regardless of the rate set via 

the auction. The auctions generally take place 

periodically (i.e., daily or 7, 28, 35 or 49 day 

periods are typical). The securities trade at par and 

are bought or sold on designated auction dates, 

Continued 

(k) Northern maintains, or causes to 

be maintained, for a period of six (6) 

years from the date of the Sale such 

records as are necessary to enable the 

persons described below in paragraph 

(l)(i), to determine whether the 

conditions of this proposed exemption, 

if granted, have been met, except that— 

(i) No party in interest or disqualified 

person with respect to a Plan which 

engages in a Sale, other than Northern 

and its affiliates, as applicable, shall be 

subject to a civil penalty under section 

502(i) of ERISA or the taxes imposed by 

section 4975(a) and (b) of the Code, if 

such records are not maintained, or not 

available for examination, as required, 

below by paragraph (l)(i); and 

(ii) A separate prohibited transaction 

shall not be considered to have occurred 

solely because, due to circumstances 

beyond the control of Northern or its 

affiliates, as applicable, such records are 

lost or destroyed prior to the end of the 

six-year period; and 

(l)(i) Except as provided below in 

paragraph (l)(ii), and notwithstanding 

any provisions of subsections (a)(2) and 

(b) of section 504 of ERISA, the records 

referred to above in paragraph (k) are 

unconditionally available at their 

customary location for examination 

during normal business hours by— 

(A) Any duly authorized employee or 

representative of the Department, the 

Internal Revenue Service, or the U.S. 

Securities and Exchange Commission; 

or 

(B) Any fiduciary of any Plan, 

including an IRA owner, that engages in 

a Sale, or any duly authorized employee 

or representative of such fiduciary; or 

(C) Any employer of participants and 

beneficiaries and any employee 

organization whose members are 

covered by a Plan that engages in the 

Sale, or any authorized employee or 

representative of these entities; 

(ii) None of the persons described 

above in paragraph (l)(i)(B)–(C) shall be 

authorized to examine trade secrets of 

Northern, or commercial or financial 

information which is privileged or 

confidential; and 

(iii) Should Northern refuse to 

disclose information on the basis that 

such information is exempt from 

disclosure, Northern shall, by the close 

of the thirtieth (30th) day following the 

request, provide a written notice 

advising that person of the reasons for 

the refusal and that the Department may 

request such information. 

III. Definitions 

For purposes of this exemption: 

(a) The term ‘‘affiliate’’ of another 

person means: (1) Any person directly 

or indirectly, through one or more 

intermediaries, controlling, controlled 

by, or under common control with such 

person; (2) any officer, director, partner, 

employee, or relative (as defined in 

section 3(15) of ERISA) of such other 

person; and (3) any corporation or 

partnership of which such other person 

is an officer, director, partner, or 

employee; 

(b) The term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual; 

(c) The term ‘‘Auction Rate Security’’ 

or ‘‘ARS’’ means a debt obligation of a 

corporation, business entity, 

municipality or other governmental 

agency with a nominal long-term 

maturity for which the interest rate is 

reset through a Dutch Auction typically 

held every 7, 14, 28, 35 or 49 days, with 

interest paid at the end of each auction 

period. The term also means preferred 

stock issued by a corporation or other 

business entity for which the dividend 

is reset and paid through the same 

process; 

(d) The term ‘‘Independent Fiduciary’’ 

shall mean the fiduciary of the Plan 

making the decision to engage the Plan 

in the covered transactions, provided 

that such fiduciary may not be Northern 

or an affiliate thereof; and 

(e) The term ‘‘Plan’’ means an 

individual retirement account (an IRA) 

or similar account described in section 

4975(e)(1)(B) through (F) of the Code; or 

an employee benefit plan as defined in 

section 3(3) of ERISA. 

EFFECTIVE DATE: If granted, this proposed 

exemption will be effective as of 

October 31, 2008. 

Summary of Facts and Representations 

1. Northern Trust Corporation 

(hereinafter, either ‘‘Northern’’ or the 

‘‘applicant’’) is a financial holding 

company that is a leading provider of 

investment management, asset and fund 

administration, fiduciary, and banking 

solutions for corporations, institutions, 

and affluent individuals. Northern 

conducts business through various U.S. 

and non-U.S. subsidiaries, including 

The Northern Trust Company (the 

‘‘Bank’’), an Illinois bank headquartered 

in Chicago, Illinois. 

The Bank is a member of the Federal 

Reserve System, its deposits are insured 

by the FDIC, and it is subject to 

regulation by both of those entities, as 

well as by the Division of Banking of the 

Illinois Department of Financial and 

Professional Regulation. Northern’s 

national bank subsidiaries are members 

of the Federal Reserve System and are 

subject to regulation by the Office of the 

Comptroller of the Currency, with 

deposits insured by the FDIC to the 

extent provided by the Federal Deposit 

Insurance Act. Northern Trust Bank, 

FSB is a federal savings bank that is not 

a member of the Federal Reserve System 

and is subject to regulation by the Office 

of Thrift Supervision and the FDIC. 

Northern also has a number of direct 

and indirect subsidiary registered 

investment advisers that are subject to 

the Investment Advisers Act of 1940, 

and a subsidiary broker-dealer, Northern 

Trust Securities, Inc. (NTSI), an SEC 

registered broker-dealer that is subject to 

the supervision of various governmental 

and self-regulatory bodies. 

Northern has a network of 79 offices 

in 18 states and has international offices 

in 16 locations in North America, 

Europe, and the Asia-Pacific region. As 

of December 31, 2009, Northern had 

consolidated total assets of $74.3 trillion 

and stockholders’ equity of $6.3 trillion. 

The Bank, founded in 1889, conducts its 

business through its U.S. operations, its 

Toronto, London, and Singapore 

branches, and various U.S. and non-U.S. 

subsidiaries. As of December 31, 2009, 

the Bank had assets under management 

of $627.2 billion and assets under 

custody of $3.7 trillion. 

2. In connection with the liquidity 

problems in the Auction Rate Securities 

(ARS) market, Northern offered to 

purchase certain ARS from certain 

client accounts, including certain Plan 

(as defined in Section III(e)) accounts.3

The ARS typically trade through Dutch 

Auctions.4 While many of these 


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presuming a successful auction. These securities 

also may be redeemed by issuers (through 

announced full or partial redemptions). Although 

they nominally are long term instruments, because 

of the interest rate and dividend reset features, they 

historically have been priced and traded as short 

term instruments due to the auction process. They 

generally are issued in minimum denominations 

ranging from $25,000 to $100,000. 

5The Department expresses no opinion herein as 

to whether the conditions of section 408(b)(17) of 

ERISA were or are satisfied by any purchase of ARS 

from a Plan by Northern. 

6For purposes of this proposed exemption, 

references to the provisions of Title I of the Act, 

unless otherwise specified, refer also to the 

corresponding provisions of the Code. 

securities continue to be rated by 

independent credit rating agencies as 

investment grade credit, many ARS 

continue to experience failed auctions. 

Because Northern is a party in interest 

or disqualified person with respect to 

the ERISA or the Code Plan accounts, 

Northern requests an administrative 

exemption granting both retroactive and 

prospective relief for the sale (the Sale) 

by a Plan of an ARS to Northern where 

the auctions for those securities have 

failed. The applicant opines that, in 

instances where Northern is not a 

fiduciary, section 408(b)(17) of ERISA 

should provide the necessary exemptive 

relief.5 In some cases, Northern has 

discretionary authority with respect to 

the Plan accounts. In other cases, 

Northern may have provided advice 

such that IRA owners or other Plan 

fiduciaries could claim that Northern is 

a fiduciary. Where Northern is or could 

be a fiduciary with respect to a Plan, 

exemptive relief is necessary to cover 

Northern’s purchases of eligible ARS 

from specified Plan accounts, including 

(i) individual retirement accounts or 

similar accounts (which may be 

beneficially owned by an employee, 

officer, director or partner of Northern); 

and (ii) employee benefit plans. 

3. Northern made one or more written 

offers (an ‘‘Offer’’) to all of its eligible 

customers to purchase all eligible ARS 

held by such customers for cash at par 

value, plus accrued but unpaid interest, 

pursuant to the relevant Offer, described 

further in Item 4, below. Each Offer was 

open for a minimum of 30 days from the 

date it was first distributed by Northern 

to its eligible customers, or for such 

longer period as determined by 

Northern from time to time. 

Acceptance of an Offer would cause 

Northern to purchase the eligible ARS 

on the next applicable coupon interest 

payment date as described in the 

relevant Offer Document. Purchase 

dates may vary depending on when an 

Offer is accepted and when the next 

coupon interest payment date for such 

eligible ARS occurs. 

Acceptance of the Offer could be 

withdrawn at any time until three 

business days prior to the payment date. 

If an eligible customer has not accepted 

the Offer and the eligible customer 

holds an account with respect to which 

Northern has discretionary control, 

Northern documents the customer’s 

direction to retain the eligible ARS and 

clarifies that Northern has no 

investment responsibility with respect 

to those securities. 

4. The Offer that Northern distributed 

to its eligible customers was marked, or 

otherwise prepared in a manner 

reasonably designed to prominently 

indicate to the recipient the subject 

matter, importance, and time-sensitivity 

of the information provided. 

The Offer complies with ‘‘plain 

English’’ standards and included 

disclosure of, or a fair and adequate 

summary of, all material aspects of: 

• The terms and conditions of the 

Offer, including reference to a Web site 

containing a description of the 

eligibility criteria used by Northern; 

• A list of eligible ARS held in the 

account (including the amount, 

identifying information, and CUSIP); 

• The background of the Offer; 

• The methods and timing by which 

eligible customers may accept the Offer; 

• The manner of determining the 

purchase dates for eligible ARS 

pursuant to the Offer; 

• The timing of payment for eligible 

ARS purchased pursuant to the Offer; 

• The methods and timing by which 

a customer may elect to withdraw its 

acceptance of the Offer; 

• The expiration date of the Offer; 

• A suggestion that eligible customers 

consult their tax advisors to determine 

the tax consequences, if any, of 

accepting the Offer and to ensure that 

accounting and financial reporting 

complies with applicable accounting 

guidance; 

• For advisory clients, disclosure that 

(a) acceptance of the Offer by an eligible 

customer will constitute such 

customer’s direction to Northern to 

purchase the eligible ARS, and (b) 

rejection of the Offer by an eligible 

customer will constitute such 

customer’s direction to Northern to 

retain the eligible ARS in the account; 

and 

• How to obtain additional 

information concerning the Offer. 

All client accounts which accepted 

the Offer were paid on a date that 

coincided with the interest payment 

date so that there would be no accrued 

but unpaid interest, or were paid 

accrued interest. No brokerage 

commissions or other fees were charged. 

5. In summary, the applicant 

represents that the transactions 

described herein satisfy the statutory 

criteria of section 408(a) of ERISA 

because, among other things: 

(a) Each covered Sale shall be made 

pursuant to a written Offer; 

(b) Each covered Sale shall be a onetime transaction for no consideration 

other than cash payment against prompt 

delivery of the ARS; 

(c) The sales price in each covered 

Sale shall equal the par value of the 

ARS, plus any accrued but unpaid 

interest or dividends as applicable, as of 

the date of the Sale; 

(d) Plans would not waive any rights 

or claims in connection with any 

covered Sale as a condition for engaging 

in such transaction; 

(e)(1) the decision to accept an Offer 

or retain the ARS shall be made by an 

Independent Fiduciary; and (2) neither 

Northern nor an affiliate thereof shall 

exercise investment discretion or render 

investment advice, within the meaning 

of 29 CFR 2510.3–21(c), in connection 

with the decision to accept the Offer or 

retain the ARS; 

(f) Plans shall not pay any 

commissions or transaction costs with 

respect to any covered Sale; 

(g) A covered Sale shall not be part of 

an arrangement, agreement, or 

understanding designed to benefit a 

party in interest or disqualified person 

to the affected Plan. 

Notice to Interested Persons 

The applicant represents that all the 

potentially interested persons cannot be 

identified and that, therefore, the only 

practicable means of notifying 

interested persons of this proposed 

exemption is by the publication of this 

notice in the Federal Register. 

Comments and requests for a hearing are 

due within 45 days from the date of 

publication of this notice of proposed 

exemption in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Karin Weng of the Department, 

telephone (202) 693–8557. (This is not 

a toll-free number.) 

The United Brotherhood of Carpenters 

Pension Fund (the Plan or the 

Applicant) Located in Las Vegas, 

Nevada [Application No. D–11634] 

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).6 If 

the exemption is granted, the 

restrictions of sections 406(a)(1)(A), (D) 


jlentini on DSKJ8SOYB1PROD with NOTICES
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and 406(b)(2) of the Act and the 

sanctions resulting from the application 

of section 4975(c)(1)(A) and (D) of the 

Code, shall not apply to the proposed 

sale (Sale) of a 10.89 acre parcel of real 

property (the Parcel), which is part of 

larger parcel of real property (the 

Nevada Property), from the Plan-owned 

Bermuda Hidden Well, LLC (Bermuda 

LLC) to the Southwest Regional Council 

of Carpenters (the Council), a party in 

interest with respect to the Plan; 

provided that the following conditions 

are satisfied: 

(a) The terms and conditions of the 

Sale are at least as favorable to the Plan 

as those obtainable in an arm’s length 

transaction with an unrelated party; 

(b) The Sale is a one-time transaction 

for cash; 

(c) As consideration, the Plan receives 

the greater of $5,383,577, or the fair 

market value of the Parcel as 

determined by a qualified, independent 

appraiser (the Appraiser) in an appraisal 

(the Appraisal) of the Nevada Property, 

which is updated on the date of Sale 

(Sale Date); 

(d) The Plan pays no commissions, 

costs or fees with respect to the Sale, 

except for customary closing costs (the 

Seller Closing Costs) and 50% of certain 

rental credits (the Rental Credits) that 

are paid to unrelated parties; and 

(e) The Plan fiduciaries review and 

approve the methodology used by the 

Appraiser, ensure that such 

methodology is properly applied in 

determining the fair market value of the 

Parcel, and also determine whether it is 

prudent to go forward with the 

proposed transaction. 

Summary of Facts and Representations 

The Parties 

1. United Brotherhood of Carpenters 

and Joiners of America (UBC), the Plan 

sponsor, is an international labor 

organization with 725 local unions and 

37 councils, including the Council. 

UBC’s General President has the 

authority to appoint members to the 

Plan’s Board of Trustees (the Board), 

with approval of UBC’s General 

Executive Board. UBC is a fiduciary 

with respect to the Plan. 

2. The Council, which is based in Los 

Angeles, California, is a contributing 

employer to the Plan and some of its 

employees are covered by the Plan. The 

Council is an intermediate labor 

organization that is aligned with 35 

local unions. In this regard, the Council 

represents over 65,000 carpenters in 

Southern California, Nevada, Arizona, 

Utah, New Mexico and West Texas. It 

has its own by-laws, elected officers, 

representatives and employers. 

Although the Council is aligned with 

the UBC, as mentioned above, it is a 

separate and autonomous entity from 

UBC. As a contributing employer to the 

Plan, the Council is a party in interest. 

However, it is not a fiduciary with 

respect to the Plan because the Board is 

not comprised of any Council members 

or local union members within the 

jurisdiction of the Council. Further, the 

Council has no discretion over the 

management or disposition of the Plan’s 

assets. 

3. The Plan is a defined benefit, 

multiemployer plan, located in Las 

Vegas, Nevada. As of December 31, 

2009, the Plan had 4,615 participants 

and beneficiaries. Also, as of December 

31, 2009, the Plan had total assets of 

$588,857,770. 

The Board consists of eight trustees 

(the Trustees), who include 

representatives from UBC, the Chicago 

Regional Council of Carpenters, the St. 

Louis Missouri District Council, the 

Alberta and Northwest Territories 

Regional Council and Local Union 745 

(which is not in the territory of the 

Council). Of the Trustees, four are 

general officers of UBC. The four 

remaining Trustees are officers of 

councils or local unions that are not 

aligned with the Council. 

The Board has appointed a 

subcommittee to make decisions 

regarding the Parcel and the Sale 

described herein. Michael Draper, the 

District Vice President of UBC for the 

Western District of UBC and Frank 

Libby, the Executive Secretary-Treasurer 

of the Chicago Regional Council of 

Carpenters are the sole members of the 

subcommittee. 

The Nevada Property—History and the 

Plan’s Acquisition 

4. The Nevada Property is located at 

6855 Bermuda Road Las Vegas, Nevada, 

south of the McCarran International 

Airport. UBC owns a building to the 

west of the Nevada Property, located at 

6801 Placid Street, Las Vegas, Nevada. 

The Nevada Property is zoned as M–1, 

Light Industrial district by the City of 

Las Vegas. The permitted uses for this 

district include office, light industrial, 

general commercial and auto related 

uses. 

The Nevada Property can be 

subdivided into two parcels. The Parcel, 

itself, a 10.89 acre tract of land, consists 

solely of asphalt-paved parking areas 

with curbs, light poles and some chain 

link fencing around the perimeter. The 

Parcel represents approximately 36.1% 

of the Nevada Property. The remaining 

19.25 acre tract of land, which is not 

subject to the proposed Sale, represents 

63.9% of the Nevada Property. Situated 

on the 19.25 acre tract are a car rental 

facility, which has a passenger terminal, 

a car wash, a car repair facility with a 

service bay, steel canopies, and other 

site improvements, such as covered 

parking spaces, yard lighting, fencing 

curbing and several booths. 

5. On April 19, 2001, the Plan 

incorporated Bermuda LLC, a limited 

liability company, in the State of 

Delaware, with the Plan serving as both 

sole member and owner. Bermuda LLC 

was formed to hold real property on 

behalf of the Plan and specifically to 

acquire the Nevada Property. 

On June 11, 2001, Bermuda LLC 

acquired the Nevada Property from LVAirport Investors, LLC, an unrelated 

party, for a total cash price of 

$10,464,126. At the time of the 

acquisition, the Nevada Property was 

encumbered by a lease (the Lease) 

between LV-Airport Investors, LLC, as 

lessor and Alamo Rent-A-Car, LLC 

(Alamo), an unrelated party, as lessee. 

Alamo, which provided car rental 

services from the Nevada Property, used 

the Nevada Property as its office and as 

a car pick-up and return facility. 

LV-Airport Investors, LLC had 

originally entered into the Lease with 

Alamo on April 12, 2001. The Lease was 

subject to separate guaranty by ANC 

Rental Corporation, an unrelated party 

and an affiliate of Alamo, that would 

guarantee the rental payments and other 

obligations under the Lease on behalf of 

Alamo. 

6. Bermuda LLC assumed the Lease in 

June 2001 and remains the lessor under 

the Lease. Although the Nevada 

Property has been continuously leased, 

the lessee has repeatedly changed from 

2001 to the present. In 2003, Vanguard 

Car Rental USA, Inc. (Vanguard), an 

unrelated party, assumed the Lease from 

Alamo pursuant to an assignment 

during bankruptcy proceedings 

involving ANC Rental Corporation, 

Alamo and related entities. In addition, 

as part of the bankruptcy proceedings, 

ANC Rental Corporation’s guaranty was 

eliminated. Currently, the Lease 

payments are no longer subject to a 

guaranty. 

7. In April 2007, McCarran 

International Airport opened a 

centralized car return facility. As a 

result, the Nevada Property would no 

longer be used for vehicle pick-ups and 

returns. Instead, the Nevada Property 

would be used henceforth for car 

cleaning and maintenance. On April 5, 

2007, Vanguard entered into a sublease 

with the Clark County Aviation 

Authority (the Authority) for the Parcel 

and an additional 7.8 acres of the 

Nevada Property. Thus, the Authority 

subleased approximately 18.69 acres 


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from the Plan for $105,883 per month or 

$.13 per month per square foot. The 

sublease expired on April 14, 2009 and 

it was not renewed. Currently, the 

Parcel is not being subleased. 

8. By letter dated June 13, 2007, 

Vanguard advised Bermuda LLC that all 

of Vanguard’s issued and outstanding 

stock had been purchased by an affiliate 

of Enterprise Rent-A-Car (Enterprise). 

The Applicant represents that this 

purchase would not result in a change 

in the Vanguard corporate legal entity, 

and that Vanguard and/or its 

subsidiaries would continue to be 

responsible for all of its respective 

obligations following the purchase with 

respect to the Plan. 

9. Effective August 1, 2009, in 

accordance with Alamo’s bankruptcy 

proceedings, Alamo officially assigned 

the Lease to Enterprise Lease 

Company—West, LLC (Enterprise 

Leasing), an unrelated party, who is the 

current lessee of the Nevada Property. 

The Lease expires on April 30, 2021. 

There are two 5 year renewal options at 

market rent that could possibly extend 

the Lease until 2031. 

10. The Lease is a triple net lease 

requiring the lessee to pay for real estate 

taxes, insurance and maintenance costs. 

Under the Lease, the annual basic rent 

for the Nevada Property was $908,500 

for the first year. Thereafter, the annual 

rent has been subject to an increase 

based upon the lesser of (a) the product 

obtained by multiplying the basic rent 

for the prior rental period by 2%, or (b) 

the product obtained by multiplying the 

basic rent for the prior year by three 

times the percentage change in the 

Department’s Bureau of Labor Statistics, 

Consumer Price Index for All Urban 

Consumers—U.S. City Average (CPI) 

during such prior rental period. The 

current rent cannot be reduced below 

the rent floor set in the prior rental 

period. For the rental year ending April 

30, 2011, the monthly rent for the 

Nevada Property is $88,704.36 per 

month or $1,064,452.32 per rental year. 

The Management and Holding of the 

Nevada Property 

11. Although Bermuda LLC holds the 

Nevada Property for the Plan, the Plan 

and any officers, that it may select, 

make all management decisions for 

Bermuda LLC. From September 1, 2002 

through June 30, 2004, the Plan had 

retained Strategic Property Advisors 

(SPA) to serve as the qualified 

professional asset manager (QPAM) for 

the Nevada Property. From July 1, 2004 

through the present, the Plan has 

retained Strategic Capital Advisers 

(SCA) to serve as the Plan’s QPAM. SPA 

has entered into a subadvisory role with 

SCA and SPA remains a fiduciary with 

respect to the Plan. Currently, 

Commerce TNP, Inc. (Commerce TNP) 

serves as the property manager for the 

Nevada Property. 

12. The Nevada Property has annually 

generated income in excess of expenses 

for the Plan since the time of 

acquisition. For the period between 

2001 through 2005, the Plan income and 

expenses for the Nevada Property are 

presented as follows in Table 1: 

TABLE 1 

2001 2002 2003 2004 2005 Totals 

Total Rental Income ......................................................... 454,250 920,613 939,026 957,806 976,962 4,248,657 

Property Expenses 

Property Management Fee .............................................. 0 0 0 0 0 ....................

Administration Fee ........................................................... 97 0 195 0 0 ....................

Engineering Expense ....................................................... 0 0 0 0 0 ....................

Statement of Business Publication Fee ........................... 25 25 25 25 30 ....................

Legal Fee ......................................................................... 1,100 0 0 0 0 ....................

Appraisal Fee ................................................................... 0 0 0 6,498 0 ....................

Delaware State Franchise Tax ........................................ 0 200 100 305 200 ....................

Nevada Annual List of Managers Fee ............................. 0 85 105 155 155 ....................

Nevada/Delaware CSC Reg. Agent Fee ......................... 0 350 448 468 488 ....................

Asset Management Fee ................................................... 0 0 5,000 7,000 13,000 ....................

Total Property Expenses .......................................... 1,222 660 5,873 14,451 13,873 36,079 

Net Income ........................................................ 453,028 919,953 933,153 943,355 963,089 4,212,578 

It should be noted that the 2001 

income reflects the period from April 1, 

2001 to December 31, 2001. 

Additionally, the 2001 and 2002 

expenses are estimates. 

13. For the period 2006–2010, the 

Plan income and expenses for the 

Nevada Property are presented as 

follows in Table 2: 

TABLE 2 

2006 2007 2008 2009 2010 Totals 

Rental Income .................................................................. 996,501 1,016,431 1,036,760 1,043,581 1,146,200 5,239,473 

Property Expenses 

Property Management Fee .............................................. 0 0 12,000 14,400 14,400 ....................

Administration Fee ........................................................... 0 0 25 0 0 ....................

Engineering Expense 7 ..................................................... 0 0 0 2,500 16,974 ....................

Statement of Business Publication Fee ........................... 30 30 30 30 30 ....................

Legal Fee ......................................................................... 0 0 0 0 480 ....................


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7The Plan paid $2,500 in 2009 and $16,974 in 

2010 for engineering fees (Engineering Fees). The 

Engineering Fees included the surveying of the 

Nevada Property and the creation of a new, separate 

legal description for the 10.89 acre Parcel. 

TABLE 2—Continued 

2006 2007 2008 2009 2010 Totals 

Appraisal Fee ................................................................... 0 6,000 2,900 6,000 6,000 ....................

Delaware State Franchise Tax ........................................ 200 200 200 250 250 ....................

Nevada Annual List of Managers Fee ............................. 155 155 125 125 125 ....................

Nevada Sec of State-Business License Fee ................... 0 0 0 0 200 ....................

Nevada/Delaware CSC Reg. Agent Fee ......................... 508 528 552 582 612 ....................

Asset Management Fee ................................................... 13,000 13,000 13,000 13,000 13,000 ....................

Total Property Expenses .......................................... 13,893 19,913 28,832 36,887 52,071 151,596 

Net Income ........................................................ 982,608 996,518 1,007,928 1,006,694 1,094,369 5,088,117 

14. After combining the expenses in 

Tables 1 and 2, the Plan has incurred 

total expenses of $187,675 excluding 

acquisition costs for the Nevada 

Property. The acquisition cost to the 

Plan was $10,464,126 for the Nevada 

Property. Therefore, the total acquisition 

and holding costs for the Nevada 

Property are $10,651,801 (i.e., 

$10,464,126 acquisition costs + 

$187,675 in holding costs). After 

combining the rental income in Tables 

1 and 2, the Plan’s total rental income 

for the years 2001–2010 is $9,488,130. 

After factoring in total rental income, 

the Plan’s net acquisition and holding 

costs for the Nevada Property are 

$1,163,671 (i.e., total acquisition and 

holding costs of $10,651,801—total 

rental income of $9,488,130). 

Lease Modification and Rental Credit 

15. On April 23, 2010, SPA, a subadviser to SCA, the Plan’s QPAM, 

negotiated a modification to the Lease 

on behalf of the Plan. This modification 

would permit the potential termination 

of Enterprise Leasing’s leasehold 

interest in the 10.89 Parcel in return for 

a termination fee of $100,000 paid to 

Enterprise Leasing (Lease Modification 

Fee). The 19.25 acre tract of land would 

remain subject to the Lease. 

Additionally, the Lease Modification 

would result in a pro rata reduction in 

Enterprise Leasing’s rental payments to 

63.9% of the original monthly rent since 

it would no longer be leasing the Parcel 

from the Plan. 

In order to free the Parcel for sale, the 

Lease Modification requires that 

Enterprise Leasing agree not to sublease 

the Parcel until the proposed Sale is 

finalized. Therefore, SPA negotiated the 

Rental Credit that went into effect 

beginning in mid-October 2010 through 

mid-January 2011. The Applicant 

represents that the Rental Credit is 

necessary because Enterprise Leasing is 

restricted from subleasing the Parcel 

while the Applicant awaits an 

administrative exemption from the 

Department. In accordance with the 

Lease Modification, the Plan has been 

required to provide Enterprise Leasing a 

$15,000 per month rental credit since 

October 2010. The Rental Credit is to be 

applied in calendar year 2011. The 

Rental Credit was renewed in midJanuary 2011 through mid-July 2011. To 

assist the Plan, SPA and the Council 

later agreed that the Council would pay 

$7,500 per month or 50% of the total 

Rental Credit. 

The Appraisal 

16. SPA retained Cushman & 

Wakefield of Nevada, Inc., located in 

Las Vegas, the Plan’s current appraiser, 

to appraise a leased fee interest in the 

Nevada Property (i.e., the 10.89 acre 

Parcel and the 19.25 acre tract) effective 

March 1, 2010 in an appraisal report 

dated June 11, 2010. Associate Director 

Stephen E. Wilson and Senior Director 

Kaye A. Cuba, who are employed by the 

Appraiser, conducted the Appraisal. Mr. 

Wilson entered the real estate business 

in 1998. He is a Certified General 

Appraiser in both Nevada and Arizona 

and is an associate member of the 

Appraisal Institute (MAI). Mr. Wilson is 

experienced in appraising multi-family, 

office, retail, industrial/warehouse, 

residential subdivisions and vacant 

land. He has also completed 

professional courses and seminars with 

various appraisal organizations 

including the MAI. 

Ms. Cuba has 25 years of experience 

in the appraisal field primarily in the 

banking industry and fee appraisal 

business. She is an MAI Appraiser and 

a Certified General Appraiser in Nevada, 

California and Arizona. Ms. Cuba also 

serves on the Appraisal Institute’s 

Education Committee and is the 2010 

President of its Las Vegas chapter. She 

has served as a panelist addressing 

appraisal review issues at local chapter 

seminars and a regional conference. 

Furthermore, Ms. Cuba has extensive 

experience and knowledge in the 

preparation of appraisals for commercial 

properties, including retail properties, 

restaurants, residential properties, light 

industrial properties, health care 

facilities, residential subdivisions and 

vacant land. She joined the Appraiser in 

February 2007 as Senior Director of 

Valuation & Advisory Services in the 

Las Vegas office. Her responsibilities 

include real estate valuation and 

consulting services for clients with 

properties located in Southern Nevada 

and Northwest Arizona. 

The Appraiser represents that the fees 

it received from the Council and its 

affiliates in 2009 were less than 1% of 

the Appraiser’s annual gross income 

within that year. The Appraiser also 

acknowledges it is aware that the 

Appraisal is being used for the purposes 

of obtaining an individual exemption 

from the Department. 

17. According to the Appraisal, the 

Appraiser determined that the Nevada 

Property, subject to the Lease had an 

‘‘As-Is’’ fair market value of 

$14,900,000.00 as of March 1, 2010. The 

Appraiser used the Cost Approach and 

the Income Capitalization Approach to 

valuation. The Appraiser explains it did 

not use the Sales Comparison Approach 

because the Nevada Property has a 

specialized land use and public 

information regarding similar sale 

transactions was generally insufficient. 

Under the Cost Approach, the 

Appraiser approximated the cost to 

replace the Nevada Property with an 

equivalent facility. In order to do so, the 

Appraiser used sale comparisons to 

determine that the value of the 

underlying land was $11,820,000. After 

considering such factors as the 

replacement cost of the Nevada 

Property, indirect costs, entrepreneurial 

profit, the structures, depreciation and a 

rent deficit, the Appraiser concluded 

that, under the Cost Approach, the 

Nevada Property was worth 

$15,700,000.00 as of March 1, 2010. 

Under the Income Capitalization 

Approach, the Appraiser approximated 


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8The Department wishes to point out that any 

future leasing of the Parcel by the Council to the 

Southwest Carpenters Training Fund for training 

purposes must be compliant with the terms and 

conditions of PTE 78–6, 43 FR 23024 (May 30, 

1978). PTE 78–6 exempts, among other transactions, 

the leasing of real property other than office space 

by an apprenticeship plan from a contributing 

employer, a wholly-owned subsidiary of such 

employer, or an employee organization any of 

whose members’ work results in contributions 

being made to the apprenticeship plan. The 

Department also notes that PTE 78–6 provides 

exemptive relief from section 406(a)(1)(A), (C) and 

(D) of the Act, but no relief from the fiduciary selfdealing or conflict of interest provisions under 

section 406(b)(1) and (2) of the Act. 

9The Council proposes to base the purchase price 

for the Parcel on the $14.9 million fair market value 

of the Nevada Property as determined as of March 

1, 2010 in the Appraisal rather than the $11 million 

fair market value for such property as determined 

as of March 1, 2011 in the Summary Appraisal. 

10Susan Borst, director of the Commerce Real 

Estate Solutions, an alliance member of the 

Appraiser, and a certified Commercial Investment 

Member, with over 15 years of real estate industry 

experience, represented that it is the customary and 

normal practice in Clark County, Nevada for the 

seller to pay real estate transfer taxes. Ms. Borst also 

states that less than 1% of her 2010 annual income 

was derived from the Council and its affiliates. 

the anticipated income and expenses 

(i.e., anticipated economic benefits) to 

determine the fair market value of the 

Nevada Property. The Appraiser 

determined that this approach resulted 

in a fair market value of $14,900,000 for 

the Nevada Property as March 1, 2010. 

The Appraiser then reconciled the 

various valuation methods and 

determined that the fair market value of 

the leased fee interest in the Nevada 

Property was $14,900,000 as of March 1, 

2010. The Appraiser weighed the 

Income Capitalization Approach more 

heavily in the Appraisal because this 

methodology mirrored the methodology 

used by purchasers of this type of 

property. Thus, on the basis of the 

Appraisal, the fair market value of the 

Parcel was $5,383,577 as of March 1, 

2010 ($14,900,000 × 10.89 acres/30.14 

acres). 

It should be noted that the Appraiser, 

also surveyed local real estate brokers 

for the Appraisal. These brokers 

indicated that upon the completion of 

renovations at the adjacent McCarran 

International Airport, the Nevada 

Property could increase in value. The 

Nevada Property appraised valued 

peaked in 2007 when it was appraised 

at $21,740,000 by the Appraiser. In an 

August 4, 2010 letter, the Appraiser 

represented that at the date of the 

Appraisal, the Appraiser did not 

anticipate that the completion of the 

McCarran Airport renovations would 

have any significant short-term effect on 

industrial land values within the 

subject’s submarket. Moreover, the 

Appraiser represented that it did not 

anticipate that the Nevada Property 

would return to its 2007 peak value 

within the next few years. Instead, any 

recovery with the industrial market 

would require a significant 

improvement in the Las Vegas 

unemployment rate and an 

improvement in the local, state and 

national manufacturing sectors. 

The Nevada Property is also located 

within the vicinity of real property 

owned by UBC. In a separate December 

15, 2010 letter, Mr. Wilson stated that 

the Appraiser did not believe the 

Nevada Property had any assemblage 

value due to its close proximity to 

UBC’s building. 

Finally, the Appraiser provided an 

updated summary appraisal report (the 

Summary Appraisal), dated March 3, 

2011, which valued a leased fee interest 

of the 10.89 acre Parcel and the 19.25 

acre tract of land comprising the Nevada 

Property (in an ‘‘as is’’ condition) at 

$11,000,000 as of March 1, 2011. The 

Summary Appraisal utilized both the 

Cost Approach and the Income 

Capitalization Approach to valuation, 

but gave the most weight to the Income 

Capitalization Approach because it 

mirrored the methodology used by 

purchasers of this property type. Thus, 

on the basis of the Summary Appraisal, 

the fair market value of the Parcel was 

$3,960,000 as of March 1, 2011 

($11,000,000 * 10.89 acres/30.14 acres). 

Terms of the Sale 

18. The Council had been trying to 

obtain property for the construction of 

a training facility over the past five 

years. The Council had made offers on 

several tracts of land and such offers 

have either been refused or encountered 

problems. The Council selected the 

Parcel because it is suitable for a 

training facility and is visible to 

freeways. The Council may lease a 

future facility to the Southwest 

Carpenters Training Fund, the 

Applicant represents that the Council 

has not voted whether to enter into such 

future lease.8

Although the Plan has not any made 

efforts to sell the Parcel to unrelated 

parties nor has it received any 

unsolicited purchase offers from 

unrelated parties, the Council’s 

purchase of the Parcel would allow the 

Plan to receive a profit. In this regard, 

the proposed Sale price for the Parcel 

that will be paid by the Council will be 

(excluding certain Seller Costs and 

Rental Credits) the higher of $5,383,577 

($14,900,000 9 * 10.89 acres/30.14 acres) 

or the fair market value of the Parcel on 

the Sale Date as determined by the 

Appraiser in an updated Appraisal on 

the Sale Date. The pro rata purchase 

price for the Parcel was approximately 

$3,780,834 ($10,464,126 original 

purchase price * 10.89 acres/30.14 

acres). Therefore, the pro rata gain for 

the Parcel is $1,602,743 ($5,383,577 

purchase price¥$3,780,834 original 

purchase price) or an approximately 

42% gain ($1,602,743 gain/$3,780,847 

cost basis) for the Parcel, without taking 

into account certain Seller Closing Costs 

and Rental Credits. 

19. The Plan will pay certain Seller 

Closing Costs in connection with the 

Sale. These Seller Closing Costs include 

owner’s title insurance of $4,263.79, 

escrow fees of $1,265, recording fees of 

approximately $100 and the Clark 

County real estate transfer tax which is 

estimated to be approximately 

$27,458.40, or total Seller Closing Costs 

of $33,087.19.10 The Seller Closing 

Costs amount to less than 1 percent of 

the proposed Sale price. 

In addition to the Seller Closing Costs, 

the Plan will pay Enterprise Leasing 

50% of all Rental Credits, as described 

above in Representation 15. These 

Rental Credits will cost the Plan a total 

of $67,500. Accordingly, the Plan’s 

aggregate costs are estimated at 

$100,587.19. 

The Applicant represents that a 

hypothetical sale to an unrelated third 

party would require the Plan to pay a 

sales commission. The Applicant states 

that such commissions typically amount 

to 4% of the value of the Sale or, in this 

case, $215,343. In a hypothetical sale to 

an unrelated third party, the Plan would 

pay $248,432 (i.e., a $215,343 

commission plus $33,087 in Seller 

Closing Costs). Thus, according to the 

Applicant, the Plan would pay less in 

closing and transaction costs in the 

proposed Sale when compared to a 

hypothetical sale to an unrelated third 

party. (The Department notes, however, 

that it is unlikely that a hypothetical 

buyer would also pay a Lease 

Modification Fee and 50% of the Rental 

Credits like the Council). 

Rationale for the Sale 

20. The Applicant represents that the 

following reasons support the Sale: 

• The Lease is no longer subject to the 

ANC Rental Corporations’s guaranty and 

is appraised at below market value. 

• Enterprise no longer uses the 

Nevada Property as its car pick-up and 

return site and the Parcel is vacant. 

• Annual rental increases are subject 

to the lesser of 2% or a CPI-linked 

formula. Accordingly, annual rental 

increases may not keep pace with 

periods of high inflation. 

• The Lease is subject to two 

extensions that could lock the Plan into 

the Lease until 2031. 


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11For purposes of this proposed exemption, 

references to section 406 of ERISA should be read 

to refer to the corresponding provisions of section 

4975 of the Code as well. 

• SCA has advised that it would be 

advantageous to the Plan to enter into 

the proposed Sale. 

• The Council would pay a portion of 

the costs associated with the Sale. Aside 

from purchase price, the Council would 

pay: (a) $16,734 to the Plan for its 2010 

Engineering Fees; (b) 50% of all Rental 

Credits from October 2010 through midJuly 2011 or $67,500; (c) the Lease 

Modification Fee of $100,000 to 

Enterprise Leasing; (d) an ALTA title 

insurance upgrade which is 

approximately $2,842.53; and (e) escrow 

charges of approximately $1,265.00. 

Therefore, the total transaction costs 

paid by the Council would be 

$188,341.53 (which is more than the 

Seller Closing Costs and Rental Credits 

paid by the Plan). 

• The Plan would not have to pay a 

sales commission in connection with 

the Sale. 

• Because the value of the Nevada 

Property peaked in 2007 and has 

declined up to the time of the Summary 

Appraisal, selling the Parcel would 

allow the Plan to recognize some profit 

it has gained since the purchase of the 

Nevada Property. 

• Because the Nevada Property had a 

12 month rate of return of negative 

13.39%, the Sale would reduce risks to 

the Plan from holding the Parcel and 

allow the Plan to receive a profit from 

a portion of such property. 

Exemptive Relief Requested 

21. According to the Applicant, the 

Sale represents a sale and transfer of 

plan assets between the Plan and the 

Council, a party in interest, that would 

violate section 406(a)(1)(A) and (D) of 

the Act. The Applicant also requests 

exemptive relief from the fiduciary 

conflict of interest provision of section 

406(b)(2) of the Act. The Applicant 

represents that although none of the 

Trustees are employees or officers of the 

Council, it is possible a potential 

conflict of interest exists since two of 

the Trustees (Mr. Draper and Mr. Libby), 

who are members of the Board 

subcommittee, are UBC officers or 

officers of other intermediate labor 

councils aligned with UBC. Because the 

Council is, itself, aligned with UBC, the 

Applicant contends that these two 

Trustees may have interests which are 

adverse to the interests of the Plan or 

the interests of the Plan’s participants or 

beneficiaries. Therefore, the Applicant 

asserts that exemptive relief from 

section 406(b)(2) of the Act is required. 

Appropriateness of the Sale 

22. The Applicant represents that the 

proposed Sale by the Plan of the Parcel 

to the Council would be 

administratively feasible because the 

Sale would be a one-time transaction for 

cash. Furthermore, the Plan would pay 

no commissions, costs or fees in 

connection with the Sale, except for 

50% of the Rental Credits and the Seller 

Closing Costs which are customarily 

paid to unrelated parties. Finally, Mr. 

Draper and Mr. Libby would review and 

approve the methodology used by the 

Appraiser, ensure that such 

methodology is properly applied in 

determining the fair market value of the 

Parcel, and also determine whether it is 

prudent to go forward with the 

proposed transaction. 

The Applicant states that the 

proposed Sale would also be in the 

interests of the Plan and its participants 

and beneficiaries because the Plan 

would realize a gain of nearly 42% 

stemming from its acquisition and 

holding of the Parcel and further 

diversify its assets, and become more 

liquid. Further, the Applicant states that 

the proposed Sale would be protective 

of the rights of the Plan’s participants 

and beneficiaries because the Plan 

would receive the greater of $5,383,577 

or the fair market value of the Parcel as 

determined by the Appraiser in an 

Appraisal of the Nevada Property, 

which is updated on the Sale Date. 

Furthermore, the terms of the Sale 

would be no less favorable to the Plan 

than the terms negotiated under similar 

circumstances at arm’s length with 

unrelated parties. Accordingly, the 

Applicant requests an exemption from 

the Department. 

Summary 

23. In summary, the Applicant 

represents that the Sale will satisfy the 

statutory requirements for an exemption 

under section 408(a) of the Act because: 

(a) The terms and conditions of the 

Sale will be at least as favorable to the 

Plan as those obtainable in an arm’s 

length transaction with an unrelated 

party; 

(b) The Sale will be a one-time 

transaction for cash; 

(c) As consideration, the Plan will 

receive the greater of $5,383,577, or the 

fair market value of the Parcel as 

determined by the Appraiser in an 

Appraisal of the Nevada Property, 

which is updated on the Sale Date; 

(d) The Plan will pay no 

commissions, costs or fees, with respect 

to the Sale, except for the Seller Closing 

Costs and 50% of the Rental Credits that 

are paid to unrelated parties; and 

(e) The Plan fiduciaries will review 

and approve the methodology used by 

the Appraiser, ensure that such 

methodology will be properly applied in 

determining the fair market value of the 

Parcel, and also will determine whether 

it is prudent to go forward with the 

proposed transaction. 

Notice to Interested Parties 

Notice of the proposed exemption 

will be given to interested persons 

within 20 days of the publication of the 

notice of proposed exemption in the 

Federal Register. The notice will be 

given to interested persons by first class 

mail or personal delivery. Such notice 

will contain a copy of the notice of 

proposed exemption, as published in 

the Federal Register, and a 

supplemental statement, as required 

pursuant to 29 CFR 2570.43(b)(2). The 

supplemental statement will inform 

interested persons of their right to 

comment on and/or to request a hearing 

with respect to the pending exemption. 

Written comments and hearing requests 

are due within 50 days of the 

publication of the notice of proposed 

exemption in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Anh-Viet Ly of the Department at (202) 

693–8648. (This is not a toll-free 

number.) 

Wolverine Bronze Profit Sharing Plan 

and Trust (the Plan) and BDR Oil, LLC 

Located in Roseville, Michigan 

Exemption Application Number D– 

11639 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the 

Employee Retirement Income Security 

Act of 1974 (ERISA or the Act) and 

section 4975(c)(2) of the Internal 

Revenue Code of 1986, as amended (the 

Code), and in accordance with the 

procedures set forth in 29 CFR Part 

2570, Subpart B (55 FR 32836, 32847, 

August 10, 1990).11

If the proposed exemption is granted, 

the restrictions of section 406(a)(1)(A) 

and (D), 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), (D) 

and (E) of the Code, shall not apply, to 

the cash sale (the Sale) by the Plan of 

a note receivable (the Note) and royalty 

interests (ORRIs), collectively known as 

the Alternative Investments, to BDR Oil, 

LLC, which is owned by Richard A. 

Smith, William Smith and Douglas 

Smith (also know as the Alternative 

Investment Group or the AIG), provided 

that the following conditions are met: 

(a) The Sale is a one-time transaction 

for cash; 


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12According to the valuation completed by 

Andrew M. Malec, Ph.D. of Gordon Advisors, an 

ORRI is an investment in which an investor 

receives cash flow from oil sales resulting from 

production in the oil well according to the 

ownership percentage, net of oil well production 

tax, but does not pay for drilling or monthly 

operating expenses of the well. In addition, the life 

of an ORRI investment is perpetual (subject to the 

terms of the lease), changes in the working interest 

holder will not affect the standing of the interest 

holder of the royalties, and the owner of the royalty 

interest benefits from future oil sales on any 

additional wells drilled on the lease. 

13Prior to such conversion, the Department’s 

Cincinnati Regional Office conducted an 

investigation of the Plan and focused on, among 

other things, the valuation of the ORRIs. As a result 

of the investigation, the Plan modified its valuation 

of the ORRIs that was used for purposes of valuing 

the individual account balances. The applicant 

represents that this modification satisfied the 

Regional Office’s requirements, and that the Plan 

will use the same modified valuation for the 

proposed transaction as was used for other 

purposes including the conversion of the Plan from 

a ‘‘traditional’’ profit sharing plan to a 401(k) plan. 

(b) The terms and conditions of the 

Sale are at least as favorable as those 

obtainable in an arm’s length 

transaction with an unrelated third 

party; 

(c) The Plan will receive no less than 

the fair market value of the Alternative 

Investments at the closing of the 

proposed transaction; 

(d) The fair market value of the 

Alternative Investments will be 

determined by a qualified independent 

appraiser; 

(e) All valuations will be updated by 

a qualified independent appraiser on 

the date that the Sale is consummated; 

(f) The Plan pays no commissions, 

fees or other expenses in connection 

with the Sale; 

(g) The Sale was not part of an 

arrangement, agreement, or 

understanding designed to benefit a 

party in interest to the Plan and is a 

result of the Plan’s conversion from a 

‘‘traditional’’ profit sharing plan to a 

401(k) plan; 

(h) The Plan will reallocate $1,450.17 

to the account balances of its 

participants and beneficiaries, 

excluding the AIG, to reflect the 

difference between the value assigned to 

the Note by the Plan trustee on the date 

of the Plan conversion, and the value of 

the Note on that same date as 

determined by the qualified 

independent appraiser; 

(i) An independent fiduciary, who is 

not a party to the proposed transaction, 

(1) Determines, among other things, 

whether it is in the best interest of the 

Plan to proceed with the sale of the 

Alternative Investments; 

(2) Reviews and approves the 

methodology used in the appraisal that 

is being relied upon; and 

(3) Ensures that such methodology is 

applied by the qualified independent 

appraiser in determining the fair market 

value of the Alternative Investments, as 

updated, on the day of the Sale; and 

(j) The Plan has not waived or 

released and does not waive or release 

any claims, demands, and/or causes of 

action which such Plan may have in 

connection with the Sale. 

Summary of Facts and Representations 

1. Wolverine Bronze Company 

(Wolverine), a privately held nonferrous jobbing foundry, located in 

Roseville, Michigan, is the sponsor of 

Wolverine Bronze Profit Sharing Plan 

and Trust (the Plan). The Shareholders 

of Wolverine are: Richard A. Smith, 

Christopher S. Smith, Robert J. Smith, 

William P. Smith, Jr., and Nicolas L. 

Smith. The Plan was a ‘‘traditional’’ 

profit sharing plan maintained by 

Wolverine before its conversion to a 

401(k) plan effective January 1, 2010. 

Prior to the conversion, the Plan’s assets 

were invested in, among other things, 

stocks, bonds, and mutual funds which 

were selected by the discretionary 

trustees. The discretionary trustees also 

invested the Plan’s assets into a note 

receivable (the Note) for Robert O. 

Keller, Jr., an unrelated third party, and 

royalty interests (ORRIs)12, collectively 

known as the Alternative Investments. 

As of December 31, 2009 the Plan had 

approximately 104 participants and 

total assets of approximately 

$6,282,474.95. The trustees of the Plan 

are Richard A. Smith and Charles Arent. 

The conversion to a 401(k) plan was 

a result of the Plan sponsor’s 

determination that it would be in the 

best interest of the participants to make 

elective deferrals and self direct 

investments. Participants were given the 

option to select from a group of mutual 

funds representing a broad range of 

investment alternatives, and also were 

given the opportunity to have all or a 

portion of their account invested in the 

Alternative Investments. 

2. Following the Plan’s conversion to 

a 401(k) plan, only 3 participants 

selected to invest in the Alternative 

Investments, which were offered.13 The 

group of individuals who selected these 

investments are Richard A. Smith 

(fiduciary and Chief Executive Officer), 

William Smith (V.P. of Operations, prior 

to his termination of employment on 

January 1, 2011) and Douglas Smith 

(V.P. of Manufacturing, prior to his 

termination of employment on January 

1, 2011)—these 3 individuals are 

brothers, and are collectively known as 

the Alternative Investment Group (the 

AIG). The AIG determined that they 

were not able to diversify their 

investments in the Plan so as to 

minimize risk. The discretionary 

trustees then concluded that in order for 

the AIG to fully participate in the new 

Plan design and minimize fiduciary 

risk, the Alternative Investments should 

be liquidated so that the proceeds may 

be reinvested in the investment 

offerings provided under the Plan. As a 

result, the AIG proposes to purchase the 

Alternative Investments from the Plan. 

3. The principal amount of the Note, 

dated June 1, 2007, was $65,000.00. The 

Note bears interest on the unpaid 

principal balance at the fixed rate of 10 

percent per annum and is payable in 

equal monthly installments of $1,381.06 

which includes both principal and 

interest. Payments under the Note 

commenced on July 1, 2007 and will 

continue until a final installment equal 

to the total unpaid principal balance is 

due on June 1, 2012. To date, all 

required payments on the Note have 

been paid as due. 

The Note was executed by the Plan 

and Mr. Robert O. Keller, Jr., an 

unrelated third party, and secured by a 

lien interest on a 1980 Diesel Truck 

owned by Mr. Keller. According to the 

applicant, the Plan has incurred no 

costs in connection with the 

administration of the Note. 

4. At the time of the conversion, a fair 

market value of $36,254.83 was assigned 

to the Note by the Plan trustee. The Note 

was recently valued by Andrew Malec 

with Gordon Advisors, P.C., (Gordon 

Advisors) located in Troy, Michigan, 

who has a PhD in economics. Mr. Malec 

used a different methodology than 

originally used by the Plan trustees, and 

determined at that time that a fair 

market value of $37,950.00 was 

appropriate. Mr. Malec’s calculation, 

which uses the present value of the 

expected cash flows from the Note, 

results in an amount of $1,450.17 more 

than the opening balances actually 

credited to the participants and 

beneficiaries. The applicant represents 

that the methodology used by Gordon 

Advisors for purposes of establishing 

the value of the Note will be used for 

the proposed transaction. The applicant 

further represents that the resulting 

$1,450.17 difference between the value 

originally assigned to the Note by the 

trustee, as compared to the value 

determined by Gordon Advisors, will be 

reallocated to the participant and 

beneficiary account balances to reflect 

the change in calculation for the 

opening balances. 

The applicant represents Mr. Malec to 

be a qualified independent appraiser 

with an expertise in valuing privatelyheld securities, spanning across a broad 

range of industries. Mr. Malec’s 

experience has involved performing for 


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14Mr. Malec selected this component of the rate 

of return based on 1-Year U.S. Treasury Notes. 

numerous purposes including 

acquisitions, fairness opinions, financial 

reporting, gift and estate taxation, 

litigation, marital dissolution, purchase 

price allocation, shareholder disputes, 

other tax and corporate related matters, 

and shareholder planning. The 

previously referenced cash flow 

methodology used by Mr. Malec takes 

into account that the rate of return on 

a debt security is composed of a 

nominal risk-free rate of interest 14 plus 

several factors that reflect inflation, the 

risk of the security, and the security’s 

marketability. As a result, Mr. Malec 

concluded that a 6.98% rate of return 

should apply to the cash flow stream of 

the Note as of the valuation date. As of 

December 22, 2010, the estimated fair 

market value of the Note is $23,628.00. 

There were 18 remaining payments on 

the Note as of December 27, 2010. 

5. The ORRIs also were valued by 

Andrew Malec. Based on the valuation 

of the ORRIs completed on February 9, 

2010, the Plan maintains investments in 

23 ORRIs. These ORRIs represent 

interests in various oil wells located 

within the state of Texas. The Plan 

originally acquired the ORRIs on March 

12, 1990 from Peter Nunez, an unrelated 

third party, for the purchase price of 

$141,205.12. As of December 31, 2009, 

the estimated fair market value of the 

ORRIs is $555,000.00. 

In determining the required rate of 

return for the ORRIs, the Dividend 

Discount Model (DDM), an Income 

Approach, was used. The DDM is a 

procedure for valuing the price of a 

stock by using predicted dividends and 

discounting them back to present value. 

It is essentially a method for valuing 

stocks based on the net present value of 

the future dividends. Mr. Malec stressed 

the importance of an appropriate rate of 

return commensurate with achieving the 

expected cash flow based on the fact 

that investors typically place a great 

deal of weight upon the expected future 

cash flow earned on the various ORRI 

investments. Therefore, the appraiser 

represents that the DDM is an 

appropriate methodology for valuing the 

ORRIs because it estimates the annual 

cash flow to be received by the royalty 

interest (i.e. the ‘‘stream of payments’’ to 

the investor) by taking into account the 

rate of return proportionate with 

realizing this estimated cash flow. 

6. The applicant proposes the sale of 

the Alternative Investments from the 

Plan to the AIG through BDR Oil, LLC 

(BDR), a Michigan limited liability 

company and entity owned by the AIG, 

at fair market value at the time of the 

closing of the Sale. The Alternative 

Investments constitute approximately 

9% of the total Plan assets (as of 

December 31, 2009). The applicant 

represents that the Sale of the 

Alternative Investments to BDR is in the 

best interests of the Plan because the 

administrative burden of separately 

accounting for and valuing the 

Alternative Investments would no 

longer be necessary, thereby reducing 

the costs to the Plan. Further, the 

participants comprising the AIG would 

be able to diversify their investments in 

the Plan, which will, in turn, ensure 

that the Plan will have sufficient 

liquidity to pay the benefits when due. 

7. The applicant represents that the 

Sale will be a one-time transaction for 

cash and that the Plan will incur no 

fees, commissions, or other expenses in 

connection with the Sale. BDR will bear 

the costs of the exemption application 

and of notifying interested persons. The 

applicant further represents that to-date 

the valuations performed by Mr. Malec 

were paid by Wolverine on behalf of the 

Plan for yearly valuation purposes, but 

that the update of the valuation for the 

Sale will be paid by BDR. The applicant 

also represents that the fees that will be 

paid to Gordon Advisors by BDR 

represent less than 1% of the firm’s 

annual income. 

8. It is also represented that a Plan 

fiduciary, Charles Arent, who is neither 

a party to the proposed subject 

transaction nor a relation to the AIG 

members, both has and will continue to 

review and approve the methodology 

used by the qualified independent 

appraiser, thereby ensuring that such 

methodology is properly applied, and 

that it is prudent to go forward with the 

proposed transaction. With respect to 

the Sale, the applicant represents that 

Richard A. Smith has recused himself 

from his fiduciary responsibilities to the 

Plan. 

9. The Plan has not waived or 

released and does not waive or release 

any claims, demands, and/or causes of 

action which such Plan may have 

against BDR and/or the AIG in 

connection with the sale of assets to 

BDR. 

10. In summary, the applicant 

represents that the proposed transaction 

satisfies the criteria for an exemption 

under section 408(a) for the following 

reasons: (a) The Sale is a one-time 

transaction for cash; (b) the terms and 

conditions of the Sale are at least as 

favorable as those obtainable in an arm’s 

length transaction with an unrelated 

third party; (c) the Plan will receive no 

less than the fair market value of the 

Alternative Investments at the closing of 

the proposed transaction; (d) the fair 

market value of the Alternative 

Investments are to be determined by a 

qualified independent appraiser; (e) all 

valuations will be updated on the date 

that the Sale is consummated; (f) the 

Plan pays no commissions, fees or other 

expenses in connection with the Sale; 

(g) the Sale was not part of an 

arrangement, agreement, or 

understanding designed to benefit a 

party in interest to the Plan and is a 

result of the Plan’s conversion from a 

‘‘traditional’’ profit sharing plan to a 

401(k) plan; (h) the Plan will reallocate 

$1,450.17 to the account balances of its 

participants and beneficiaries, 

excluding the AIG, to reflect the 

difference between the value assigned to 

the Note by the Plan trustee on the date 

of the Plan conversion, and the value of 

the Note on that same date by the 

qualified independent appraiser; (i) the 

Plan fiduciary who is not an interested 

party to the proposed transaction, 

Charles Arent, (1) determines, among 

other things, whether it is in the best 

interest of the Plan to proceed with the 

sale of the Alternative Investments; (2) 

reviews and approves the methodology 

used in the appraisal that is being relied 

upon; and (3) ensures that such 

methodology is applied by the qualified 

independent appraiser in determining 

the fair market value of the Alternative 

Investments, as updated, on the day of 

the Sale; and (j) the Plan has not waived 

or released and does not waive or 

release any claims, demands, and/or 

causes of action which such Plan may 

have in connection with the Sale. 

FOR FURTHER INFORMATION CONTACT: 

Breyana A. Penn of the Department, 

telephone (202) 693–8546. (This is not 

a toll-free number.) 

Verizon Communications, Inc. (Verizon) 

and Cellco Partnership, doing business 

as Verizon Wireless (Verizon Wireless; 

collectively, the Applicants) 

Located in Basking Ridge, New Jersey 

[Application Nos. L–11651 and L– 

11652] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the Act 

and in accordance with the procedures 

set forth in 29 CFR part 2570, Subpart 

B (55 FR 32836, 32847, August 10, 

1990). If the exemption is granted, the 

restrictions of sections 406(a) and (b) of 

the Act shall not apply to the 

reinsurance of risks and the receipt of 

premiums therefrom by Exchange 

Indemnity Company (EIC), a whollyowned subsidiary of Verizon, in 

connection with an insurance contract 

sold by Prudential Life Insurance 

Company (Prudential) or any successor 


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insurance company to Prudential which 

is unrelated to Verizon, to provide 

group-term life insurance to certain 

employees and retirees of Verizon and 

Verizon Wireless under The Plan for 

Group Insurance maintained by Verizon 

and the Verizon Wireless Health and 

Welfare Benefits Plan maintained by 

Verizon Wireless (collectively, the 

Plans), provided the following 

conditions are met: 

(a) EIC— 

(1) Is a party in interest with respect 

to the Plan by reason of a stock or 

partnership affiliation with Verizon that 

is described in section 3(14)(E) or (G) of 

the Act, 

(2) Is licensed to sell insurance or 

conduct reinsurance operations in at 

least one State as defined in section 

3(10) of the Act, 

(3) Has obtained a Certificate of 

Authority from the Insurance 

Commissioner of its domiciliary state 

which has neither been revoked nor 

suspended, 

(4)(A) Has undergone and shall 

continue to undergo an examination by 

an independent certified public 

accountant for its last completed taxable 

year immediately prior to the taxable 

year of the reinsurance transaction; or 

(B) Has undergone a financial 

examination (within the meaning of the 

law of its domiciliary State, Vermont) by 

the Insurance Commissioner of Vermont 

within 5 years prior to the end of the 

year preceding the year in which the 

reinsurance transaction occurred, and 

(5) Is licensed to conduct reinsurance 

transactions by a State whose law 

requires that an actuarial review of 

reserves be conducted annually by an 

independent firm of actuaries and 

reported to the appropriate regulatory 

authority; 

(b) The Plans pay no more than 

adequate consideration for the 

insurance contracts; 

(c) In subsequent years, the formula 

used to calculate premiums by 

Prudential or any successor insurer will 

be similar to formulae used by other 

insurers providing comparable coverage 

under similar programs. Furthermore, 

the premium charge calculated in 

accordance with the formula will be 

reasonable and will be comparable to 

the premium charged by the insurer and 

its competitors with the same or a better 

rating providing the same coverage 

under comparable programs; 

(d) The Plans only contract with 

insurers with a rating of A or better from 

A.M. Best Company. The reinsurance 

arrangement between the insurer and 

EIC will be indemnity insurance only, 

i.e., the insurer will not be relieved of 

liability to the Plans should EIC be 

unable or unwilling to cover any 

liability arising from the reinsurance 

arrangement; 

(e) No commissions, costs or other 

expenses are paid with respect to the 

reinsurance of such contracts; and 

(f) For each taxable year of EIC, the 

gross premiums and annuity 

considerations received in that taxable 

year by EIC for life and health insurance 

or annuity contracts for all employee 

benefit plans (and their employers) with 

respect to which EIC is a party in 

interest by reason of a relationship to 

such employer described in section 

3(14)(E) or (G) of the Act does not 

exceed 50% of the gross premiums and 

annuity considerations received for all 

lines of insurance (whether direct 

insurance or reinsurance) in that taxable 

year by EIC. For purposes of this 

condition (f): 

(1) The term ‘‘gross premiums and 

annuity considerations received’’ means 

as to the numerator the total of 

premiums and annuity considerations 

received, both for the subject 

reinsurance transactions as well as for 

any direct sale or other reinsurance of 

life insurance, health insurance or 

annuity contracts to such plans (and 

their employers) by EIC. This total is to 

be reduced (in both the numerator and 

the denominator of the fraction) by 

experience refunds paid or credited in 

that taxable year by EIC. 

(2) all premium and annuity 

considerations written by EIC for plans 

which it alone maintains are to be 

excluded from both the numerator and 

the denominator of the fraction. 

Summary of Facts and Representations 

1. Verizon Communications, Inc. 

(Verizon) is a world-wide 

telecommunications company. Verizon 

maintains The Plan for Group 

Insurance, a welfare plan within the 

meaning of section 3(1) of the Act, for 

the benefit of its employees. The Plan 

for Group Insurance provides various 

types of welfare benefits and includes a 

group-term life insurance component 

(basic, supplemental and dependent 

coverage), which is fully insured. 

2. (2) Verizon Wireless is a Delaware 

Partnership and is a worldwide cellular 

telephone company. Verizon Wireless is 

a majority owned subsidiary of Verizon. 

Verizon Wireless maintains the Verizon 

Wireless Health and Welfare Benefits 

Plan, a welfare plan within the meaning 

of section 3(1) of the Act, for the benefit 

of its employees. The Verizon Wireless 

Health and Welfare Benefits Plan 

provides various types of welfare 

benefits and includes a group-term life 

insurance component (basic, 

supplemental and dependent coverage), 

which is fully insured. 

3. EIC is a 100% owned subsidiary of 

Verizon (EIC is 53% owned by NYNEX 

and 47% owned by GTE, each of which 

are wholly owned subsidiaries of 

Verizon). EIC is domiciled in the State 

of Vermont. As of September 30, 2010, 

EIC reported approximately $918 

million in 2010 gross annual premiums 

and $1,713 million in total assets. The 

Applicants represent that for each 

taxable year of EIC, the total amount of 

premiums, both for the subject 

reinsurance transactions as well as for 

any direct sale or other reinsurance of 

life insurance and health insurance for 

all employee benefit plans for which 

EIC is a party in interest by reason of a 

relationship to the sponsoring employer 

described in section 3(14)(E) or (G) of 

the Act have not exceeded and will not 

exceed 50% of the gross premiums 

received by EIC from all lines of 

insurance in that taxable year. 

4. The group-term life insurance 

component of The Plan for Group 

Insurance has approximately 74,774 

participants and beneficiaries and the 

group-term life insurance component of 

the Verizon Wireless Health and 

Welfare Benefits Plan has approximately 

66,522 participants and beneficiaries. 

The proposed reinsurance shall only 

apply with respect to certain 

participants (the Affected Participants) 

in the Plans. Affected Participants shall 

include: (a) Non-union represented 

employees and their dependents; (b) 

retirees who were non-union 

represented employees while employed, 

and their dependents; and (c) union 

represented employees and retirees of 

Verizon Wireless. 

5. The life insurance is currently 

underwritten by Prudential Life 

Insurance Company (Prudential), an 

unaffiliated insurance carrier. Verizon 

and Verizon Wireless have entered into 

a policy with Prudential for 100% of 

this coverage. Verizon proposes to use 

its subsidiary, EIC, to reinsure 100% of 

the risk through a reinsurance contract 

between EIC and Prudential in which 

Prudential would pay 100% of the 

premiums to EIC. The Applicants 

represent that there is no additional cost 

to the Plan as a result of the reinsurance 

arrangement. From the Affected 

Participants’ perspective, they have a 

binding contract with Prudential, which 

is legally responsible for the group-term 

life insurance risk associated under the 

Plan. Prudential is liable to provide the 

promised coverage regardless of the 

proposed reinsurance arrangement. 

6. The Applicants represent that the 

proposed transaction will not in any 

way affect the cost to the insureds of the 


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group-term life insurance contracts, and 

the Plans will pay no more than 

adequate consideration for the 

insurance. Verizon, Verizon Wireless 

and/or EIC will not profit from the 

reinsurance arrangement at the expense 

of the Plans or the Affected Participants. 

Also, the Affected Participants are 

afforded insurance protection from 

Prudential at competitive rates arrived 

at through arm’s-length negotiations. 

Prudential is rated ‘‘A+’’ by the A. M. 

Best Company, whose insurance ratings 

are widely used in financial and 

regulatory circles. Prudential has assets 

in excess of $667 billion. Prudential will 

continue to have the ultimate 

responsibility in the event of loss to pay 

insurance benefits to the employee’s 

beneficiary. The Applicants represent 

that EIC is a sound, viable company 

which is dependent upon insurance 

customers that are unrelated to itself 

and its affiliates for premium revenue. 

7. The Applicants represent that the 

proposed reinsurance transaction will 

meet all of the conditions of PTE 79–41 

covering direct insurance transactions: 

(a) EIC is a party in interest with respect 

to the Plans (within the meaning of 

section 3(14)(G) of the Act) by reason of 

stock affiliation with Verizon and 

Verizon Wireless, which maintain the 

Plans. 

(b) EIC is licensed to do business in 

the State of Vermont. 

(c) EIC has undergone an examination 

by an independent certified public 

accountant for its fiscal year ending 

December 31, 2009. 

(d) EIC has received a Certificate of 

Authority from its domiciliary State (as 

defined in Act section 3(10)), the State 

of Vermont, which has neither been 

revoked nor suspended. 

(e) The Plans will pay no more than 

adequate consideration for the 

insurance. The proposed transaction 

will not in any way affect the cost to the 

insureds of the group-term life 

insurance transaction. 

(f) No commissions, costs or other 

expenses will be paid with respect to 

the acquisition of reinsurance by 

Prudential from EIC. 

(g) For each taxable year of EIC, the 

‘‘gross premiums and annuity 

considerations received’’ in that taxable 

year for group life and health insurance 

(both direct insurance and reinsurance) 

for all employee benefit plans (and their 

employers) with respect to which EIC is 

a party in interest by reason of a 

relationship to such employer described 

in section 3(14)(E) or (G) of the Act will 

not exceed 50% of the ‘‘gross premiums 

and annuity considerations received’’ by 

EIC from all lines of insurance in that 

taxable year. All of the premium income 

of EIC comes from reinsurance. EIC has 

received no premiums for the groupterm life insurance in the past. 

8. In summary, the Applicants 

represent that the proposed transaction 

will meet the criteria of section 408(a) 

of the Act because: (a) Plan participants 

and beneficiaries are afforded insurance 

protection by Prudential, an ‘‘A+’’ rated 

group insurer, at competitive market 

rates arrived at through arm’s-length 

negotiations; (b) EIC is a sound, viable 

insurance company which does a 

substantial amount of public business 

outside its affiliated group of 

companies; and (c) each of the 

protections provided to the Plans and 

the Affected Participants and their 

beneficiaries by PTE 79–41 will be met 

under the proposed reinsurance 

transaction. 

FOR FURTHER INFORMATION CONTACT: Gary 

H. Lefkowitz of the Department, 

telephone (202) 693–8546. (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 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 

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 

that each application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 2nd day of 

May, 2011. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2011–10999 Filed 5–4–11; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employment and Training 

Administration 

Proposed Information Collection for 

Growing America Through 

Entrepreneurship (GATE) II Evaluation; 

Comment Request 

AGENCY: Employment and Training 

Administration, Labor. 

ACTION: Notice. 

SUMMARY: The Department of Labor 

(Department), as part of its continuing 

effort to reduce paperwork and 

respondent burden, conducts a preclearance consultation program to 

provide the general public and federal 

agencies with an opportunity to 

comment on proposed and or 

continuing collections of information in 

accordance with the Paperwork 

Reduction Act of 1995 (PRA95) [44 

U.S.C. 3506(c)(2)(A)]. This program 

helps to ensure that requested data can 

be provided in the desired format, 

reporting burden (time and financial 

resources) is minimized, collection 

instruments are clearly understood, and 

the impact of collection requirements on 

respondents can be properly assessed. 

Currently, the Employment and 

Training Administration (ETA) is 

soliciting comments on a new data 

collection for the GATE II Evaluation. A 

copy of the proposed information 

collection request (ICR) can be obtained 

by contacting the office listed below in 

the addressee section of this notice. 

DATES: Written comments must be 

submitted to the office listed in the 

addressee section below on or before 

July 5, 2011. 


jlentini on DSKJ8SOYB1PROD with NOTICES