20246 Federal Register / Vol. 80, No. 72 / Wednesday, April 15, 2015 / Notices 

1The Department has considered exemption 

applications received prior to December 27, 2011 

under the exemption procedures set forth in 29 CFR 

part 2570, subpart B (55 FR 32836, 32847, August 

10, 1990). 

2For purposes of this proposed exemption, 

references to specific provisions of Title I of the 

Act, unless otherwise specified, refer also to the 

corresponding provisions of the Code. 

Dated: April 10, 2015. 

Brette Steele, 

Designated Federal Officer, National 

Commission on Forensic Science. 

[FR Doc. 2015–08680 Filed 4–14–15; 8:45 am] 

BILLING CODE 4410–18–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– 

11726, Rock Wool Manufacturing 

Company; L–11784, Eli Lilly and 

Company and Elco Insurance Company 

Limited; D–11798, Robert A. 

Handelman Roth IRA No. 2; and, D– 

11809 and L–11810, Roofers Local 195 

Pension Fund and Roofers Local 195 

Joint Apprenticeship Training Fund. 

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. 

ll, 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 email to: 

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

(202) 219–0204 by the end of the 

scheduled comment period. The 

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: All comments will be made 

available to the public. Do not include 

any personally identifiable information 

(such as Social Security number, name, 

address, or other contact information) or 

confidential business information that 

you do not want publicly disclosed. All 

comments may be posted on the Internet 

and can be retrieved by most Internet 

search engines. 

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 (76 FR 

66637, 66644, October 27, 2011).1

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. 

Rock Wool Manufacturing Company 

Salaried Retirement Plan (the Plan) Located 

in Leeds, AL 

[Application No. D–11726] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the Act (or 

ERISA) and section 4975(c)(2) of the 

Code, and in accordance with the 

procedures set forth in 29 CFR part 

2570, subpart B (76 FR 46637, 66644, 

October 27, 2011).2 If the exemption is 

granted, the restrictions of sections 

406(a)(1)(A), 406(b)(1) and 406(b)(2) of 

the Act and the sanctions resulting from 

the application of section 4975 of the 

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

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

the proposed in-kind contribution (the 

Contribution) to the Plan of a parcel of 

unimproved real property (the Property) 

by Rock Wool Manufacturing Company 

(Rock Wool or the Company), the Plan 

sponsor and a party in interest with 

respect to the Plan, provided that the 

following conditions are satisfied: 

(a) A qualified independent fiduciary 

(the Independent Fiduciary), acting on 

behalf of the Plan: 

(1) Determines that the Contribution 

is in the interests of the Plan and 

protective of the Plan’s participants and 

beneficiaries; and 

(2) Determines that the Property is 

valued for purposes of the Contribution 

at the Property’s fair market value as of 

the date of the Contribution, as 

determined by a qualified independent 

appraiser (the Independent Appraiser); 

(b) The Independent Fiduciary 

performs the following steps in order to 

make the determinations described 

above in paragraph (a): 

(1) Reviews, negotiates, and approves 

the specific terms of the Contribution; 

and 

(2) Ensures, for the purposes of the 

Contribution, that the appraisal report 

(the Appraisal Report) is consistent with 

sound principles of valuation; 

(c) As of the date of the Contribution, 

the Independent Fiduciary monitors 

compliance by Rock Wool with respect 

to the terms of the Contribution and 

with the conditions of this exemption, 

if granted, to ensure that such terms and 

conditions are satisfied at all times; 

(d) The Plan does not pay any 

commissions, costs or other expenses, 

including any fees that are currently 

charged or accrued in the future by the 

Independent Fiduciary and the 


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3Section 3(38) of the Act provides, in relevant 

part, that the term ‘‘investment manager’’ means 

any fiduciary (other than a trustee or named 

fiduciary, as defined in section 1102(a)(2) of this 

title)—(A) who has the power to manage, acquire, 

or dispose of any asset of a plan; (B) who (i) is 

registered as an investment adviser under the 

Investment Advisers Act of 1940, and (ii) is a bank, 

as defined in that Act; and (C) has acknowledged 

in writing that he is a fiduciary with respect to the 

plan. 

4 It is within the Plan’s investment policy to allow 

in-kind contributions that are made by Rock Wool. 

Independent Appraiser, in connection 

with the Contribution; and 

(e) The terms and conditions of the 

Contribution are no less favorable to the 

Plan than the terms that would be 

negotiated at arm’s length between 

unrelated third parties under similar 

circumstances. 

(f) The contributed value of the 

Property is equal to the Property’s fair 

market value, as determined by the 

Independent Appraiser on the 

transaction date, less a 35 percent 

discount to account for certain 

marketability limitations. 

Summary of Facts and Represenations 

1. Rock Wool, headquartered in 

Leeds, Alabama, was founded in 1943. 

The current Chairman and CEO of Rock 

Wool is Sylvester Miniter III and the 

current Vice President of Operations is 

Gerald Miller. Rock Wool operates as a 

manufacturer of residential blowing 

wool insulation and high temperature 

pipe insulation fabrication. During the 

1970’s, Rock Wool began to incorporate 

into its product line certain materials 

containing asbestos. When the harmful 

effects of asbestos were later discovered, 

Rock Wool was named as the defendant 

in numerous lawsuits. Following the 

exhaustion of its insurance coverage, 

Rock Wool filed for Chapter 11 

bankruptcy protection. Subsequent to 

Rockwool’s bankruptcy filing, plaintiff 

attorneys reached a settlement 

agreement under which Rockwool’s 

owners relinquished ownership rights 

and contributed Company stock to an 

asbestos settlement fund (the Settlement 

Fund). Pursuant to the terms of the 

settlement agreement, any profits earned 

by Rock Wool are to be deposited into 

the settlement fund to pay claimants on 

a periodic basis. As of September 30, 

2014, Rock Wool had total assets of 

$5,706,884.62 and total liabilities of 

3,108,653.82. 

2. The Plan, which was adopted by 

Rock Wool on May 1, 1974, is structured 

as a defined benefit plan. The Plan’s 

trustees are Sylvester Miniter III and 

Gerald Miller (the Trustees), and the 

Plan’s investment manager is Lee 

Robertson of Legg Mason Investment 

Counsel. As the Plan’s investment 

manager, Mr. Robertson exercises 

discretion over the Plan’s assets, and as 

such, qualifies as a fiduciary under 

section 3(38) of the Act.3

As of January 28, 2015, the Plan 

covered 27 participants and held assets 

valued at approximately $2,537,114. 

The Plan has been frozen to new 

participants since December 31, 2001, 

and to benefit accruals since August 31, 

2008. 

3. Rock Wool contributed $26,675 to 

the Plan during the year ending 

December 31, 2012, and $134,428 for 

the year ending December 31, 2013. As 

of September 1, 2012 and September 1, 

2013, the adjusted funding target 

attainment percentage (AFTAP) for the 

Plan was 80.82% and 81.09%, 

respectively. Pursuant to section 302 of 

the Act, Rock Wool is obligated to make 

a required minimum cash contribution 

to the Plan of $134,000 on or before May 

15, 2015 for the 2014 Plan year (the 

Required Contribution). 

4. Rock Wool proposes to make an inkind contribution to the Plan of certain 

unimproved real property, in lieu of 

cash, due to its current cash flow 

restrictions. Currently, Rock Wool is 

experiencing restricted cash flow 

problems due to, among other things, its 

inability to obtain third party financing 

and its funding obligations with respect 

to the Settlement Fund. 

In effect, the in-kind contribution of 

the Property to the Plan will offset the 

minimum funding amount due to the 

Plan under section 302 of the Act, as the 

contribution value of the Property (the 

fair market value of the Property minus 

the marketability discount) will exceed 

the $134,000 Required Contribution. 

Thus, the contribution of the Property 

will allow Rock Wool to forego making 

a $134,000 cash payment to the Plan.4

Accordingly, Rock Wool requests an 

administrative exemption from the 

Department because the proposed 

Contribution would otherwise violate 

several provisions of the Act. 

5. Section 406(a)(1)(A) of the Act 

provides that a fiduciary with respect to 

a plan shall not cause a plan to engage 

in a transaction if the fiduciary knows 

or should know that such transaction 

constitutes a direct or indirect sale or 

exchange, or leasing, of any property 

between a plan and a party in interest. 

Section 3(14)(A) of the Act defines the 

term ‘‘party in interest’’ to include a 

fiduciary. Section 3(14)(C) of the Act 

also defines the term party in interest to 

include an employer, any of whose 

employees are covered by such plan. 

The Trustees, who are principals of 

Rock Wool, together with Mr. 

Robertson, are parties in interest with 

respect to the Plan, as fiduciaries. In 

addition, Rock Wool is a party in 

interest with respect to the Plan as an 

employer whose employees are covered 

by the Plan. 

With respect to a defined benefit plan, 

such as the Plan, an employer assumes 

an obligation to make cash contributions 

to the plan in order to fund promised 

benefits. Rock Wool’s proposed 

Contribution of the Property to the Plan 

would thus constitute a discharge of 

Rock Wool’s legal obligation with 

respect to the Required Contribution, as 

noted above, as well as, depending on 

the Plan’s funding status in future years, 

Rock Wool’s obligation to make cash 

contributions to the Plan in the future. 

As such, the Plan would, in effect, be 

exchanging its legal right to receive a 

cash contribution for the receipt of real 

property. Thus, Rock Wool’s proposed 

Contribution of the Property to the Plan 

constitutes a prohibited sale or 

exchange in violation of section 

406(a)(1)(A) of the Act. 

The Contribution would also violate 

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

Section 406(b)(1) prohibits a fiduciary 

from dealing with the assets of the plan 

in such fiduciary’s own interests or for 

such fiduciary’s personal account. In 

determining that it would be 

appropriate for the Plan to receive the 

Contribution of the Property from Rock 

Wool instead of cash, the Trustees 

would effectively be releasing Rock 

Wool from, at minimum, its $134,000 

cash obligation to the Plan. Due to the 

fact that the Trustees hold executive 

positions at Rock Wool, each Trustee 

would be dealing with the assets of the 

Plan for his own interest or personal 

account. 

In addition, section 406(b)(2) of the 

Act prohibits a fiduciary from acting in 

such fiduciary’s individual or other 

capacity in any transaction involving 

the plan on behalf of a party (or from 

representing a party) whose interests are 

adverse to the interests of the plan, or 

the interests of the Plan participants and 

beneficiaries. As Trustees and Rock 

Wool principals, Messrs. Miniter and 

Miller may have divided loyalties in 

representing both the interests of the 

Plan and Rock Wool with respect to the 

Contribution of the Property. 

6. The Property that is the subject of 

the Contribution was purchased for 

$36,175 in 1947 by the Cusick Family, 

the original owners of Rock Wool. The 

Cusicks incorporated Rock Wool in July 

of 1958, at which time the Property 

became the Company’s primary 

manufacturing and warehouse facility. 

The Property is located at 8200 

Thorton Avenue, Leeds, Alabama, and 


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5Mr. Robinson represents that during the course 

of his due diligence, he had conversations with the 

Plan Trustees and Rock Wool management as to the 

potential benefit of the Property to the Plan. During 

such conversations, Rock Wool management 

expressed its belief that the Property could generate 

revenue in the future, either from a sale or through 

leasing. On the basis of his conversations with Rock 

Wool management, Mr. Robinson concluded that 

the Property should serve the Plan well in terms of 

growth of asset value and, potentially, as a current 

income stream through a leasing strategy. 

currently consists of 2.67 acres of 

unimproved vacant land that is not 

encumbered by a mortgage. The 

Property is located approximately 1.3 

miles from Rock Wool’s manufacturing 

plant. The land is not presently used by 

Rock Wool, nor will it be used in the 

future by Rock Wool, its affiliates, or 

members of the Cusick Family. The only 

ongoing expenses associated with the 

Property are real estate taxes, which 

amount to approximately $1,800 per 

year. 

7. The Property was appraised on 

August 4, 2014, by James P. Sumners, a 

State Certified Real Property Appraiser 

in the State of Alabama (License # 

G00037) (the Independent Appraiser). 

Mr. Sumners is employed by the real 

estate appraisal firm of Providence 

Company (Providence), located in 

Birmingham, Alabama. Mr. Sumners has 

certified that he ‘‘has no present or 

prospective interest in the [P]roperty 

that is the subject of this report, and has 

no personal interest or bias with respect 

to the parties involved.’’ Further, Mr. 

Sumners represents that his fees derived 

from Rock Wool are equal to less than 

1% of Providence’s revenues, from all 

sources. 

Due to the fact that the Property is a 

parcel of vacant land, Mr. Sumners 

based his valuation solely on the Market 

Approach. Mr. Sumners reported his 

conclusion in a summary appraisal 

report, dated August 6, 2014, and 

formulated his opinion and conclusion 

in accordance with Standard Rule 1 of 

the Uniform Standards of Professional 

Appraisal Practice (USPAP). The 

Appraisal Report was written in 

compliance with USPAP and Financial 

Institutions Reform, Recovery and 

Enforcement Act of 1989 (FIRREA) 

guidelines. After inspecting the Property 

and analyzing all relevant data, Mr. 

Sumners determined the ‘‘AS–IS’’ Fee 

Simple Market Value of the Property to 

be $325,000.00, as of August 4, 2014. 

8. On August 21, 2013, the Trustees 

hired Layton Engineering of 

Birmingham, Alabama (Layton), an 

unrelated party, to conduct an 

environmental engineering report (the 

Environmental Report) on the Property. 

In its Environmental Report, Layton 

tested soil at the Property for heightened 

levels of chromium. The tests were 

compared with a previous soil 

assessment conducted at the Property by 

Layton in 2002, as well as against four 

background samples that were obtained 

from a nearby property. Each nearby 

property was reasonably expected to be 

unaffected by current or historical 

processes and within depositional 

environments similar to those at the 

Property. Based on the tests, Layton 

concluded that the results of the 

analysis demonstrated that the levels of 

chromium at the Property site were well 

within the range of natural background 

concentrations of chromium in the 

unaffected adjacent soils. Thus, Layton 

has confirmed that the Property is 

environmentally clean. 

9. The Trustees have selected 

Lubbock National Bank (LNB) to serve 

on behalf of the Plan as the Independent 

Fiduciary with respect to the proposed 

Contribution. Specifically, LNB has 

designated Christopher L. Robinson, 

Senior Vice President and Senior Trust 

Officer of LNB, to prepare the 

Independent Fiduciary Report and to 

assume the duties and responsibilities 

of the Independent Fiduciary for the 

Plan. Mr. Robinson’s qualifications 

include thirteen years of experience as 

an ERISA attorney and graduate and 

undergraduate degrees in Finance. Mr. 

Robinson represents that he is 

knowledgeable as to the duties and 

responsibilities of an ERISA fiduciary 

by virtue of his educational background 

and his experience as an official with 

LNB. Mr. Robinson has also served as a 

fiduciary for other qualified plans. 

10. Mr. Robinson represents that the 

only revenue received by LNB from any 

party in interest to the Plan are those 

fees derived from Rock Wool in 

connection with Mr. Robinson’s duties 

as the Plan’s Independent Fiduciary, 

and that these fees are equal to less than 

1% of LNB’s revenues from all sources, 

for both 2013 and 2014. In addition, Mr. 

Robinson states that neither he nor any 

officer, board member, or shareholder of 

LNB is related in any way to Rock Wool, 

or its principals, through ownership, 

common officers or directors, debt 

relationships, business dealings, or 

family relationships. Mr. Robinson 

further represents that neither Rock 

Wool nor any of its principals have 

deposited any funds in checking 

accounts, savings accounts, or 

certificates of deposit maintained by 

LNB. 

11. In his role as Independent 

Fiduciary, Mr. Robinson represents that 

he will confirm that the Property has 

been properly titled in the name of the 

Plan by reviewing the title records and 

by ensuring that the Contribution to the 

Plan has in fact been made. Further, Mr. 

Robinson will ensure that the Plan does 

not pay any fees or commissions with 

respect to the Contribution. 

12. Mr. Robinson has expressed his 

views in support of the Contribution, 

stating that the Contribution is favorable 

to the Plan. In determining whether the 

in-kind contribution would be in the 

interests of the Plan, Mr. Robinson 

reviewed and considered: (a) 

Representations made by Rock Wool 

regarding the Plan and the Property; (b) 

the value conclusions and related 

analysis presented by the Independent 

Appraiser; (c) discussions with certain 

members of Rock Wool’s senior 

management regarding the Plan and the 

related investment policy, the nature of 

the Property, and future prospects for 

the usefulness and marketability of such 

Property 5; (d) the Plan’s investment 

objectives, policies, and related Plan 

documents; (e) whether the terms and 

conditions of the Contribution are no 

less favorable to the Plan than terms 

negotiated at arm’s length under similar 

circumstances between unrelated third 

parties; and (f) other analyses and 

investigations. 

13. Based on his review, Mr. Robinson 

determined that the Contribution of the 

Property is appropriate and in the 

interest of the Plan’s participants and 

beneficiaries. In this regard, Mr. 

Robinson concluded that the 

Contribution will substantially increase 

the funded status of the Plan, and will 

place the Plan in a more secure actuarial 

and financial position, with both a 

higher funding percentage and a larger 

funding standard account balance. 

Additionally, Mr. Robinson concluded 

that the Plan’s acquisition of the 

Property will improve the 

diversification of Plan investments and 

further Plan investment policies and 

objectives. Further, Mr. Robinson stated 

that the Contribution presents the Plan 

with the added benefit of a potential 

future stream of cash flow, in the event 

that the Property is leased to third 

parties. 

14. With regard to potential 

alternatives to the proposed 

Contribution, Mr. Robinson considered 

a sale of the Property to an unrelated 

third party. Mr. Robinson asserted that 

such a sale would be beneficial to 

neither the Plan nor Rock Wool, due to 

the fact that: (a) The Property likely 

would have to be sold at a discounted 

amount, approximately 25% to 35% 

below fair market value; and (b) the sale 

would likely take between 36 and 48 

months to complete. 

Based upon Mr. Robinson’s 

representations, the Applicant 

subsequently determined that a 35% 


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Federal Register / Vol. 80, No. 72 / Wednesday, April 15, 2015 / Notices 20249 

discount should be applied to the 

Property’s fair market value to account 

for marketability limitations. 

Accordingly, the Applicant has agreed 

that the Property’s contribution value, 

after applying the 35% discount, is 

$211,250, subject to any fair market 

value adjustments made by the 

Appraiser on the transaction date. Thus, 

the contributed value of the Property 

would represent 7.69% of the Plan’ 

assets. 

15. Rock Wool represents that the 

Contribution is administratively feasible 

because the transaction would require a 

simple re-deeding of the Property to the 

Plan and would not require the Plan to 

pay any fees or commissions. Further, 

Rock Wool believes the Contribution 

would be in the interests of the Plan and 

its participants and beneficiaries and 

protective of their rights because the 

Contribution would increase the value 

of the Plan’s assets. 

16. In summary, it is represented that 

the proposed transaction satisfies or will 

satisfy the statutory criteria for an 

exemption under section 408(a) of the 

Act because: 

(a) The Independent Fiduciary, acting 

on behalf of the Plan: 

(1) Has determined that the 

Contribution is in the interests of the 

Plan and protective of the Plan’s 

participants and beneficiaries; and 

(2) Will determine that the Property is 

valued for purposes of the Contribution 

at the Property’s fair market value as of 

the date of the Contribution, as 

determined by the Independent 

Appraiser; 

(b) The Independent Fiduciary has 

performed the following steps in order 

to make his determinations, described 

above in paragraph (a): 

(1) Reviewed, negotiated, and 

approved the specific terms of the 

Contribution; and 

(2) Ensured, for purposes of the 

Contribution, that the Appraisal Report 

is consistent with sound principles of 

valuation; 

(c) As of the date of the Contribution, 

the Independent Fiduciary will monitor 

compliance by Rock Wool with respect 

to the terms of the Contribution and 

with the conditions of this exemption, 

if granted, to ensure that such terms and 

conditions are satisfied at all times; 

(d) The Plan will not pay any 

commissions, costs or other expenses, 

including any fees that are currently 

charged or accrued in the future by the 

Independent Fiduciary and the 

Independent Appraiser, in connection 

with the Contribution; and 

(e) The terms and conditions of the 

Contribution will not be less favorable 

to the Plan than the terms that would be 

negotiated at arm’s length between 

unrelated third parties under similar 

circumstances. 

(f) The contributed value of the 

Property will be equal to the Property’s 

fair market value, as determined by the 

Independent Appraiser on the 

transaction date, less a 35 percent 

discount to account for certain 

marketability limitations. 

Notice to Interested Parties 

The persons who may be interested in 

the publication in the Federal Register 

of the Notice of Proposed Exemption 

(the Notice) include all individuals who 

are participants in the Plan. It is 

represented that such interested persons 

will be notified of the publication of the 

Notice by first class mail to such 

interested person’s last known address 

within fifteen (15) days of publication of 

the Notice in the Federal Register. Such 

mailing will contain a copy of the 

Notice, as it appears in the Federal 

Register on the date of publication, plus 

a copy of the Supplemental Statement, 

as required, pursuant to 29 CFR 

2570.43(b)(2), which will advise all 

interested persons of their right to 

comment on and/or to request a hearing. 

All written comments or hearing 

requests must be received by the 

Department from interested persons 

within 45 days of the publication of this 

proposed exemption in the Federal 

Register. 

All comments will be made available 

to the public. 

Warning: Do not include any 

personally identifiable information 

(such as name, address, or other contact 

information) or confidential business 

information that you do not want 

publicly disclosed. All comments may 

be posted on the Internet and can be 

retrieved by most Internet search 

engines. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Joseph Brennan of the Department at 

(202) 693–8456. (This is not a toll-free 

number.) 

Eli Lilly and Company (Lilly) and Elco 

Insurance Company Limited (Elco) 

(Together, the Applicants) Located in 

Indianapolis, IN and North Charleston, SC, 

Respectively 

[Application No. L–11784] 

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 (76 FR 66637, 66644, October 27, 

2011). 

Section I. Transactions 

If the proposed exemption is granted, 

the restrictions of sections 406(a)(1)(D) 

and 406(b) of the Act shall not apply to 

the reinsurance of risks and the receipt 

of premiums therefrom by Elco, an 

affiliate of Lilly, as the term ‘‘affiliate’’ 

is defined in Section III(a)(1) below, in 

connection with insurance contracts 

sold by American United Life Insurance 

Company (AUL) or any successor 

insurance company (a Fronting Insurer) 

to provide optional group term life 

insurance benefits (Optional Group Life) 

to participants in the Eli Lilly and 

Company Life Insurance and Death 

Benefit Plan (the Life Insurance Plan), a 

component of the Eli Lilly and 

Company Employee Welfare Plan (the 

Plan), provided the conditions set forth 

in Section II, below, are satisfied. 

Section II. Conditions 

(a) Elco— 

(1) Is a party in interest with respect 

to the Plan by reason of a stock or 

partnership affiliation with Lilly that is 

described in section 3(14)(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 Director of the 

Department of Insurance of its 

domiciliary state (South Carolina), 

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 

covered by this proposed exemption, if 

granted; or 

(B) Has undergone a financial 

examination (within the meaning of the 

law of South Carolina) by the Director 

of the South Carolina Department of 

Insurance (SCDI) within five (5) years 

prior to the end of the year preceding 

the year in which such reinsurance 

transaction has occurred; and 

(5) Is licensed to conduct reinsurance 

transactions by South Carolina, 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 Life Insurance Plan pays no 

more than adequate consideration for 

the insurance contracts; 

(c) No commissions are paid by the 

Life Insurance Plan with respect to the 

direct sale of such contracts or the 

reinsurance thereof; 


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6The Summary of Facts and Representations is 

based on the Applicant’s representations and does 

not reflect the views of the Department, unless 

indicated otherwise. 

(d) Effective January 1, 2012, there 

was an immediate and objectively 

determined benefit to Plan participants 

and beneficiaries in the form of 

increased benefits. Any modification to 

such benefits will at least approximate 

the increase in benefits that are effective 

January 1, 2012, as described in the 

Notice of Proposed Exemption (the 

Notice) and will continue in all 

subsequent years of each contract of 

reinsurance involving Elco and a 

Fronting Insurer and in every renewal of 

each contract of reinsurance involving 

Elco and a Fronting Insurer; 

(e) In the initial year and in 

subsequent years of coverage provided 

by a Fronting Insurer, the formulae used 

by the Fronting Insurer to calculate 

premiums will be similar to formulae 

used by other insurers providing 

comparable optional life insurance 

coverage under similar programs. 

Furthermore, the premium charge 

calculated in accordance with the 

formulae will be reasonable and will be 

comparable to the premiums charged by 

the Fronting Insurer and its competitors 

with the same or a better rating 

providing the same coverage under 

comparable programs; 

(f) The Fronting Insurer has a 

financial strength rating of ‘‘A’’ or better 

from A. M. Best Company (A. M. Best). 

The reinsurance arrangement between 

the Fronting Insurer and Elco will be 

indemnity insurance only (i.e., the 

Fronting Insurer will not be relieved of 

liability to the Life Insurance Plan 

should Elco be unable or unwilling to 

cover any liability arising from the 

reinsurance arrangement); 

(g) The Life Insurance Plan retains an 

independent, qualified fiduciary, as 

defined in Section III(c) (the 

Independent Fiduciary) to analyze the 

transactions and to render an opinion 

that the requirements of Section II(a) 

through (f) and (h) of this proposed 

exemption have been satisfied; 

(h) Participants and beneficiaries in 

the Plan will receive in subsequent 

years of every contract of reinsurance 

involving Elco and the Fronting Insurer 

the benefit increases effective January 1, 

2012, as described in the Notice, or 

benefit increases no less in value, as 

determined by the Independent 

Fiduciary, than the objectively 

determined increased benefits such 

participants and beneficiaries received 

effective January 1, 2012; 

(i) The Independent Fiduciary will 

monitor the transactions proposed 

herein on behalf of the Plan on a 

continuing basis to ensure such 

transactions remain in the interest of the 

Plan; take all appropriate actions to 

safeguard the interests of the Plan; and 

enforce compliance with all conditions 

and obligations imposed on any party 

dealing with the Plan; and 

(j) In connection with the provision to 

participants in the Life Insurance Plan 

of the Optional Group Life which is 

reinsured by Elco, the Independent 

Fiduciary will review all contracts (and 

any renewal of such contracts) of the 

reinsurance of risks and the receipt of 

premiums therefrom by Elco and must 

determine that the requirements of this 

proposed exemption, if granted, and the 

terms of the benefit enhancements 

continue to be satisfied. 

Section III. Definitions 

(a) The term ‘‘affiliate’’ includes: 

(1) Any person directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with the person; 

(2) Any officer, director, employee, 

relative, or partner in any such person; 

and 

(3) Any corporation or partnership of 

which such 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 ‘‘Independent Fiduciary’’ 

means a person who: 

(1) Is not an affiliate of Lilly or Elco 

and does not hold an ownership interest 

in Lilly, Elco, or affiliate of Lilly or Elco; 

(2) is not a fiduciary with respect to 

the Plan prior to its appointment to 

serve as the Independent Fiduciary; 

(3) has acknowledged in writing that: 

(i) It is a fiduciary and has agreed not 

to participate in any decision with 

respect to any transaction in which it 

has an interest that might affect its best 

judgment as a fiduciary; and 

(ii) it has appropriate technical 

training or experience to perform the 

services contemplated by the 

exemption, if granted; 

(4) For purposes of this definition, no 

organization or individual may serve as 

Independent Fiduciary for any fiscal 

year in which the gross income received 

by such organization or individual (or 

partnership or corporation of which 

such organization or individual is an 

officer, director, or 10 percent or more 

partner or shareholder) from Lilly, Elco, 

or affiliates of Lilly or Elco, (including 

amounts received for services as an 

independent fiduciary under any 

prohibited transaction exemption 

granted by the Department) for that 

fiscal year exceeds two percent (2%) of 

such organization’s or individual’s gross 

income from all sources for the prior 

fiscal year; 

(5) No organization or individual 

which is an Independent Fiduciary and 

no partnership or corporation of which 

such organization or individual is an 

officer, director or ten percent (10%) or 

more partner or shareholder may 

acquire any property from, sell any 

property to, or borrow any funds from 

Lilly, Elco, or affiliates of Lilly or Elco 

during the period that such organization 

or individual serves as an Independent 

Fiduciary and continuing for a period of 

six months after such organization or 

individual ceases to be an Independent 

Fiduciary or negotiates any such 

transaction during the period that such 

organization or individual serves as an 

Independent Fiduciary; and 

(6) In the event a successor 

Independent Fiduciary is appointed to 

represent the interests of the Plan with 

respect to the subject transaction, there 

should be no lapse in time between the 

resignation or termination of the former 

Independent Fiduciary and the 

appointment of the successor 

Independent Fiduciary. 

Summary of Facts and 

Representations 6

Background 

1. Eli Lilly and Company (Lilly), 

headquartered in Indianapolis, IN, is 

one of the world’s largest manufacturers 

and distributors of pharmaceuticals. 

Lilly also engages in research and 

development. Lilly employs over 17,000 

employees in the United States and over 

38,000 employees worldwide. In 2012, 

Lilly had net income of approximately 

$4.1 billion and revenue of $22.6 

billion. 

2. Elco Insurance Company Limited 

(Elco) is a captive insurance and 

reinsurance corporation and a whollyowned subsidiary of Eli Lilly 

International Corporation, which itself 

is a wholly-owned subsidiary of Lilly. 

Elco was incorporated in Bermuda on 

July 10, 1975, to provide direct coverage 

to Lilly for various exposures. On June 

15, 2011, the State of South Carolina 

Department of Banking, Insurance, 

Securities and Health Care 

Administration issued a Certificate of 

Authority permitting a branch of Elco to 

transact the business of a captive 

insurance company. JLT Insurance 

Management (Bermuda) Ltd. performs 

the accounting functions, records 

retention, and other management and 

administrative services for Elco. 

Wilmington Trust performs the same 

services for the Elco branch. Elco is 


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7The Applicant represents that approximately 

68% of employees who are eligible for Optional 

Group Life purchase such coverage. 

8The Applicants represent that AUL’s overall 

financial strength is rated A+ by A. M. Best. 

9According to the Applicants, Lilly and Elco 

became aware of the prohibited transactions in 

October 2010, at which time they put the 

reinsurance arrangement on hold pending the 

issuance of an individual exemption. 

10The Applicants explain that profits were 

measured as the sum of all payments received by 

Elco from AUL in connection with Elco’s 

reinsurance of the relevant coverages, plus the total 

interest earned on the premiums received by Elco. 

11Under the Life Insurance Plan, all premiums for 

Optional Group Life are paid by participants who 

elect such coverage. 

12The Applicants state that the total amount 

received by Elco from AUL in premiums for 

reinsurance during the period was $3,073,906.00. 

The Applicants explain that total interest earned on 

the premiums was determined using the Online 

Calculator, and as of August 1, 2011, lost earnings 

totaled $854,878.11. According to the Applicants, 

on August 1, 2011, Elco made a payment to AUL 

Continued 

subject to regulation by the South 

Carolina Department of Insurance and is 

required to maintain $500,000 of capital 

and surplus at all times. Elco currently 

provides the following insurance 

coverage to Lilly and its subsidiaries: 

Property, Transit, Workers’ 

Compensation, Auto, General Liability, 

and Product Liability. As of December 

31, 2012, Elco had total assets of 

$141,923,761 and the gross written 

premium was $18,303,690. 

3. Lilly sponsors the Eli Lilly and 

Company Employee Welfare Plan (the 

Plan), which provides eligible 

employees with medical, life insurance, 

dental, disability, death benefits, and 

other welfare benefits. As of December 

31, 2011, the Plan provided benefits to 

approximately 25,334 active and retired 

participants. The total gross assets of the 

Plan as of December 31, 2011, were 

$1,372,933,491. 

4. The Applicants represent that Lilly 

currently provides life insurance and 

death benefits to eligible employees 

through the Eli Lilly and Company Life 

Insurance and Death Benefits Plan (the 

Life Insurance Plan), which is a 

component of the Plan. Benefits under 

the Life Insurance Plan include basic 

life insurance, for which Lilly pays 100 

percent of the cost, and optional group 

term life insurance benefits (Optional 

Group Life), for which employee 

participants pay 100 percent of the cost. 

According to the Applicants, 

participants in the Life Insurance Plan 

may elect, at their own discretion, 

Optional Group Life that includes 

Supplemental and Dependent 

Coverage.7 Supplemental Coverage is 

equal to one, two, three, four, or five 

times a participant’s base salary. The 

maximum Supplemental Coverage 

amount is $3 million. Dependent 

Coverage is equal to $10,000 per child 

($2,000 for children under 6 months of 

age) and $10,000, $20,000, or $50,000 

for a spouse or domestic partner. The 

Applicants represent that policy 

premiums are determined by American 

United Life Insurance Company (AUL), 

which insures the Optional Group Life. 

The Applicants state that participants 

who elect dependent spouse or 

domestic partner coverage pay 

premiums based on age and amount of 

coverage; participants pay child 

coverage premiums at a fixed rate 

(currently, $0.375 per month). 

5. The Applicants represent that the 

Supplemental and Dependent coverages 

include an Accelerated Benefit Option 

which allows part of a participant’s or 

dependent’s Optional Group Life benefit 

to be paid while the participant or 

dependent is still living if the 

participant or dependent is terminally 

ill and has a limited life expectancy. 

The Applicants represent that 

‘‘terminally ill’’ or ‘‘a limited life 

expectancy’’ means an injury or 

sickness that, despite appropriate 

medical care, is reasonably expected to 

result in the person’s death within 

twelve months from the date of payment 

of the Accelerated Life Benefit, as 

determined by AUL. The Applicants 

represent that AUL may require that the 

person be examined at AUL’s expense 

by AUL’s choice of physician. The 

Applicants further explain that utilizing 

the Accelerated Benefit Option reduces 

the benefit that would otherwise be 

payable upon the participant’s or 

dependent’s death. 

6. The Applicants represent that Lilly 

reached an agreement with AUL,8 a 

party unrelated to Lilly and its affiliates, 

for AUL to serve prospectively as the 

direct insurer for the Optional Group 

Life coverage of the Life Insurance Plan 

and then contract with Elco to reinsure 

a portion of such coverage. 

Past Reinsurance Arrangement With 

Elco 

7. According to the Applicants, the 

Department recently investigated the 

Plan with respect to a prior reinsurance 

transaction that began in 1993 in which 

Elco had been reinsuring certain 

Optional Group Life coverage for Lilly 

that were provided under the Plan. 

According to the Applicants, after 

counsel advised Lilly and Elco that, 

absent an individual exemption, the 

Department might take the position that 

the reinsurance arrangement could 

involve one or more prohibited 

transactions, reinsurance payments to 

Elco ceased and Lilly and Elco began a 

process of correcting the prior 

transactions. According to the 

Applicants, Lilly paid correction 

expenses and took a number of steps to 

correct the transactions, as described 

below. 

8. The Applicants represent that, as 

part of Lilly’s corrective actions, Keith 

A. Dall, a principal with Milliman 

Actuarial Services (Milliman) reviewed 

the transactions. In a written report, Mr. 

Dall determined that the premiums paid 

by the Life Insurance Plan for the 

optional dependent and life insurance 

coverages during the period from March 

14, 2005, through October 2010,9 were 

within the range of premiums that 

would have been charged for 

comparable coverage by insurers 

comparable to AUL. 

9. In addition to the review by Mr. 

Dall, the Applicants represent that Elco 

made restorative payments for the Life 

Insurance Plan’s benefit, which 

represented Elco’s profits during the 

relevant period.10 The Applicants state 

that Elco used the Department’s 

Voluntary Fiduciary Correction Program 

Online Calculator (the Online 

Calculator) to determine the appropriate 

amount. The Applicants further 

represent that in order to ensure that 

Elco’s restorative payments could only 

be used for the benefit of participants 

and beneficiaries in the Life Insurance 

Plan, the payments were made to AUL 

to be credited to a Premium PrePayment Account (the Account) 

established for the Plan’s benefit. 

According to the Applicants, the 

Account will pay 25 percent of each 

premium payment due under the 

Optional Group Life policies until the 

Account is exhausted, and during such 

time, participants electing Optional 

Group Life will have their premiums 

reduced by a corresponding 25 

percent.11 The Applicants represent that 

AUL agreed to credit interest on the 

Account monthly at a rate equal to the 

two-year U.S. Treasury Bond rate as of 

July 27, 2011. The Applicants further 

represent that, under a written 

agreement, Elco, AUL, and the 

Employee Benefits Committee of Eli 

Lilly and Company (the Committee), 

acting as plan administrator, recognize 

that the amounts credited to the 

Account and any earnings credited 

thereto are the assets of the Plan, which 

may not be used for any purposes other 

than to provide benefits and pay 

reasonable expenses in accordance with 

the terms of the Plan. Thus, according 

to the Applicants, Elco’s total restorative 

payment to the Account was 

$3,929,834.64.12 The Applicants 


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for credit to the Account in the amount of 

$3,928,784.11. However, because AUL did not 

receive this payment until August 2, 2011, a 

supplementary interest payment was made on 

August 3, 2011, in the amount of $1,050.53. 

13The Department is expressing no view herein 

as to the Applicants’ assertions regarding the 

absence of prohibited transactions in connection 

with payment of the restorative payment to AUL for 

the benefit of the Life Insurance Plan and the Plan. 

Furthermore, the Department is expressing no view 

herein as to whether AUL’s administration of the 

Account may be deemed to constitute a provision 

of services or whether section 408(b)(2) would be 

applicable to such transaction. 

14For example, the Applicants explain that if 

there is a claim on the Optional Group Life policy 

for $450,000, AUL will be responsible for 100% of 

the first $250,000. Elco would cover 75% of the 

remaining $200,000 ($150,000) with AUL remaining 

responsible for 25% of that $200,000 ($50,000). So 

in this scenario, AUL’s total exposure is $300,000 

and Elco’s total exposure is $150,000. Additionally, 

the Applicants represent that in the event Elco 

becomes insolvent, AUL would be responsible for 

the entire $450,000. 

15The Applicants note that in Fiscal Year 2012, 

Lilly would have received 51.4% of the total 

premium. However all premiums to which Elco is 

entitled continue to be paid to AUL until an 

individual exemption is issued. 

represent that the restorative payment 

did not involve any transaction that 

could be prohibited within the meaning 

of section 406(a) or (b) of the Act. In this 

regard, according to the Applicants, (i) 

Elco made the restorative payment to 

AUL for the Plan’s benefit and there was 

no transfer of assets from the Life 

Insurance Plan or the Plan, or use of 

assets of the Life Insurance Plan or other 

Plan assets for the benefit of Elco or 

Lilly or another party in interest, and (ii) 

neither the Committee nor any other 

person made a waiver of remedies that 

might be available to the Life Insurance 

Plan or the Plan with respect to the 

prohibited reinsurance transaction. 

Furthermore, the Applicant states that, 

to the extent that AUL’s administration 

of the Account may be deemed to 

constitute a provision of services to the 

Life Insurance Plan or the Plan by AUL, 

such services should be exempted by 

virtue of the statutory exemption under 

section 408(b)(2) of the Act.13

10. The Applicants represent that the 

past prohibited reinsurance transactions 

were reported on the Plan’s 2009 Form 

5500, filed with the Department in 

October 2010, and the correction was 

disclosed on the Plan’s 2010 Form 5500. 

According to the Applicants, the 

Department examined the prohibited 

reinsurance transactions as a part of an 

investigation and determined that it 

would take no further actions with 

respect to the matter because Lilly had 

made the corrective payments described 

above. The Department issued a final 

closing letter on December 12, 2012. 

Proposed Reinsurance Arrangement 

With Elco 

11. The Applicants explain that if this 

proposed exemption is granted, AUL 

will serve as the direct insurer for the 

Optional Group Life part of the Life 

Insurance Plan and then contract with 

Elco to provide reinsurance coverage for 

75 percent of Optional Group Life risks 

within the $250,000 to $600,000 band of 

exposure.14 The Applicants state that 

the reinsurance agreement with AUL 

does not have a set term, but either Elco 

or AUL can terminate the agreement no 

sooner than 60 days after mailing notice 

to the other party. AUL may also 

terminate the agreement: (1) If annual 

premiums payable for the Optional 

Group Life drop below $800,000 or if 

Lilly ceases to own more than 50 

percent of Elco; (2) upon insolvency, 

bankruptcy, receivership, rehabilitation, 

or liquidation of Elco; or (3) if Elco is 

unable or unwilling to meet one or more 

of its obligations under the agreement 

and fails to cure the default within 30 

days of notification from AUL. The 

Applicants represent that the benefits to 

Lilly and Elco of this reinsurance 

arrangement include eliminating the 

insurer’s margins (in this case AUL), 

more control over the life insurance 

program, access to data about the Life 

Insurance Plan, and the possibility that 

it could write other employer-specific 

coverages in the captive. 

12. The Applicants state that AUL’s 

reinsurance agreement with Elco (the 

Reinsurance Agreement) will be 

‘‘indemnity only’’—that is, AUL will not 

be relieved of its liability for benefits 

under the Life Insurance Plan if Elco is 

unable or unwilling to satisfy the 

liabilities arising from the reinsurance 

arrangement. The Applicants further 

represent that the reinsurance 

arrangement is a ‘‘quota share’’ 

arrangement, meaning that Elco will 

receive 75 percent of the premium 

applicable to the reinsured risk less 

ceding commission and risk charges.15

The Applicants represent that although 

Elco is entitled to a share of the 

premium, Elco has no discretion with 

respect to denying a claim made by 

Lilly’s Life Insurance Plan participants 

and beneficiaries. Finally, the 

Applicants note that AUL does not 

insure, and Elco does not reinsure, the 

basic life insurance benefits under the 

Life Insurance Plan. 

13. The Applicants represent that Elco 

is a party in interest with respect to the 

Plan pursuant to section 3(14)(G) of the 

Act. Therefore, the reinsurance 

transaction would result in the indirect 

transfer of Life Insurance Plan premium 

payments, which are plan assets, to 

Elco, in violation of ERISA section 

406(a)(1)(D), which prohibits the 

transfer to, or use by or for the benefit 

of, a party in interest, of any assets of 

the plan. Additionally, the Applicants 

represent that the transactions could 

constitute violations of section 406(b)(1) 

of the Act, which prohibits a fiduciary 

from dealing with the assets of a plan in 

his interest or for his own account, and 

section 406(b)(3) of the Act, which 

prohibits a fiduciary from receiving any 

consideration for his own personal 

account from any party dealing with a 

plan in connection with a transaction 

involving plan assets. In this regard, the 

Applicants suggest that the Benefits 

Committee could be found to have used 

plan assets for the benefit of Lilly’s 

affiliate, Elco, by causing the Life 

Insurance Plan to pay premiums to AUL 

under insurance contracts they know 

will be reinsured by Elco. The 

Applicants also indicate that the 

proposed reinsurance transaction could 

violate section 406(b)(2) of the Act, 

which prohibits a fiduciary from acting 

in any transaction involving a plan on 

behalf of a party whose interests are 

adverse to the interests of the Plan. In 

this regard, the Applicants note that, in 

connection with the subject reinsurance 

transactions, Elco has an interest that is 

adverse to the interests of the Plan. 

Therefore, Lilly could be found to have 

acted in a transaction involving the Life 

Insurance Plan on behalf of a party 

whose interests are adverse to the 

interests of the Life Insurance Plan by 

causing Elco to reinsure the Plan’s 

contract with AUL for Optional Group 

Life. Accordingly, this proposed 

exemption, if granted, will provide 

relief from the prohibitions set forth in 

sections 406(a)(1)(D) and 406(b) of the 

Act for the reinsurance transactions and 

the corresponding premiums that Elco 

will receive. 

Enhancements 

14. The Applicants note that, since 

January 1, 2012, in anticipation of the 

proposed exemptive relief described 

herein, certain enhancements (the 

Enhancements) have been provided to 

participants in the Eli Lilly Health Plan 

(the Health Plan), which is a component 

of the Plan. In this regard, the 

Applicants state that the Enhancements 

described below would not have been 

added to the Health Plan but for the 

proposed arrangement that is the subject 

of this notice. The Applicants state that 

Lilly is bearing the entire cost of such 

Enhancements. The Applicants explain 

that all programs are voluntary and 

consist of the following: 

(a) Enhanced Coaching Program— 

provides additional coaching for health 

conditions not previously covered. The 


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16The Applicants note that the Plan may offer 

more incentives to encourage participants to 

undergo biometric screenings and complete the 

Well-Being Assessment. 

17The Applicants state that Mr. Dall, or such 

other Independent Fiduciary as shall be retained, 

shall be paid by Lilly. 

program also provides a new predictive 

model to identify participants who 

would most likely benefit from 

coaching; 

(b) Biometric Screenings— 

participants have multiple options in 

which to participate in the voluntary 

screenings. The screenings include data 

on height, weight, waist circumference, 

full lipid panel, and glucose testing. 

Each participant can obtain a well-being 

report through a web portal and then 

share it with his or her personal 

physician, health coach, or employee 

health services practitioner to help 

detect health risks earlier. If a 

participant receives a result that is 

critically abnormal, the participant 

receives a follow-up call to explain the 

results and any available Plan or 

wellness program resources for that 

particular condition or risk factor; and 

(c) Enhanced Health Risk Assessment/ 

Well-Being Assessment—a more 

comprehensive voluntary health and 

wellness assessment will combine 

questions on physical and emotional 

health, productivity, work environment, 

and healthy behaviors. This assessment 

is intended to help employees better 

understand their health risks and areas 

where behaviors may hinder their 

health. It will be used in connection 

with the biometric screenings to 

communicate with individuals about 

voluntary coaching programs that would 

be medically beneficial to such 

individuals based on their particular 

condition or risk factors.16

15. The Applicants represents that 

Lilly has incurred substantial costs 

related to the enhanced wellness 

program. The Applicants represent that, 

although it is difficult to break down in 

its entirety, the following costs are 

associated with the enhanced wellness 

program: On-site health coach for 

Indianapolis sites ($200,000 per year); 

Web site portal ($250,000 per year); Onsite biometric screenings for all U.S. 

employees (approx. $50/employee); and 

Counseling, support groups, one-on-one 

coaching, and smoking cessation 

products (approx. $12,000 per year). 

16. The Applicants represent that if 

the Enhancements are modified, 

alternative enhancements of at least the 

same approximate value, as determined 

by an independent, qualified fiduciary 

will continue in all subsequent years of 

the reinsurance arrangement. 

Independent Fiduciary 

17. In connection with this exemption 

request, the Applicants represent that 

they have retained Keith A. Dall, from 

Milliman, to act as the Independent 

Fiduciary (the Independent Fiduciary) 

on behalf of the Plan for the purpose of 

evaluating, and if appropriate, 

approving the subject transactions.17 In 

this regard, Mr. Dall is responsible for 

conducting a due diligence review and 

analysis of the proposed transactions 

and for providing a written opinion 

explaining why he believes the 

arrangement meets the Department’s 

requirements for an administrative 

exemption. The Applicants represent 

that Mr. Dall will also determine 

whether the conditions of the proposed 

exemption and the terms of the benefits 

enhancements continue to be satisfied. 

18. Mr. Dall certifies that he is 

qualified to serve as the Independent 

Fiduciary in that, among other things, 

he has appropriate training, experience, 

and facilities to act on behalf of the Plan 

in accordance with the fiduciary duties 

and responsibilities prescribed by the 

Act. Mr. Dall represents that he and 

Milliman are independent of the parties 

to the covered transactions because 

Milliman’s gross income from Lilly for 

the prior fiscal year does not exceed two 

percent of Milliman’s gross annual 

income. Mr. Dall also represents that 

neither he nor Milliman was a fiduciary 

with respect to the Plan prior to this 

appointment. Moreover, Mr. Dall 

represents that neither he nor Milliman 

is an affiliate, officer, director, 

employee, or partner of Elco, Lilly, or 

AUL. Furthermore, the Applicants state 

that Milliman is not a corporation or 

partnership in which Lilly or Elco has 

an ownership interest or is a partner and 

that Milliman does not, on its own 

account, own any shares or otherwise 

have an ownership interest in Lilly, 

Elco, or any of their affiliates. Finally, 

the Applicants represent that Milliman 

will acknowledge in writing its 

acceptance of fiduciary responsibility 

and has agreed not to participate in any 

decision with respect to any transaction 

in which it has an interest that might 

affect its best judgment as a fiduciary. 

Moreover, neither Milliman, nor any 

partnership or corporation of which 

Milliman is an officer, director, or ten 

percent or more partner or shareholder, 

intends to acquire any property from, 

sell any property to, or borrow funds 

from Lilly, Elco, or their affiliates while 

serving as the Independent Fiduciary or 

for six months after serving as the 

Independent Fiduciary. If it becomes 

necessary in the future to appoint a 

successor Independent Fiduciary to 

replace Milliman, the Applicants 

represent that they will notify the 

Department sixty (60) days in advance 

of such appointment. Any successor 

will have the same, or substantially 

similar, responsibilities, experience, and 

independence as Milliman. If such a 

successor is appointed, the Applicants 

represent there will be no lapse in time 

between the resignation or termination 

of the former Independent Fiduciary 

and the appointment of the successor 

Independent Fiduciary. 

19. The Applicants represent that in 

connection with the reinsurance 

transactions, Mr. Dall reviewed, among 

other things: A draft of Eli Lilly and 

Elco’s request to the Department for an 

administrative exemption; Elco’s 

audited financial statements for the year 

ending December 31, 2012; the 

insurance rates between Lilly and AUL; 

the reinsurance agreement between AUL 

and Elco; and documentation 

summarizing the Enhancements. 

Furthermore, Mr. Dall produced an 

Independent Fiduciary Report (the 

Independent Fiduciary Report) wherein 

he considered the covered transactions 

and made the following determinations: 

Mr. Dall represents that Milliman 

compared the insurance rates between 

Lilly and AUL to rates for similar group 

supplemental life and dependent life 

benefits and found them to be 

competitive and within normal ranges. 

In addition to this, Mr. Dall represents 

that Milliman reviewed the premium 

rate history with the claims and expense 

history on this block of business and 

found the loss ratios to be reasonable 

relative to the industry and consistent 

with the intended loss ratio stated in the 

AUL actuarial memorandum provided 

by AUL. Mr. Dall represents that 

Milliman believes that other insurance 

carriers would offer similar rates given 

the experience on this block of business. 

Additionally, Mr. Dall confirmed that he 

received a copy of the reinsurance 

agreement between AUL and Elco and 

the Plan pays no commissions with 

respect to the reinsurance with Elco. 

Mr. Dall also confirmed that Elco is 

licensed to conduct insurance 

transactions, including reinsurance 

transactions, in the State of South 

Carolina, which requires captive 

reinsurers to file an annual actuarial 

opinion prepared by an independent 

actuary. Additionally, Mr. Dall 

confirmed that AUL, the Fronting 

Insurer, received a rating of A+ from 

A.M. Best, as of May 8, 2013. 

Finally, Mr. Dall determined that the 

Enhancements described above will 

result in an immediate and objectively 

determined benefit to the Plan’s 

participants and beneficiaries through, 


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among other things, the offer of 

coaching, biometric screenings, and a 

well-being assessment. 

Statutory Findings 

20. The Applicants represent that the 

proposed exemption is administratively 

feasible. The reinsurance of the 

Optional Group Life contracts is 

governed by a reinsurance agreement 

between AUL and Elco that is subject to 

review by the Independent Fiduciary 

and can be audited to determine 

compliance with the conditions of this 

proposed exemption, if granted. 

Furthermore, the proposed exemption 

will not require continued monitoring 

or other involvement by the 

Department. 

21. The Applicants also represent that 

the proposed exemption is in the 

interest of the Plan because it will 

include a material increase in Plan 

benefits for participants and 

beneficiaries through the 

Enhancements, described above. 

Specifically, Lilly amended the Plan 

effective January 1, 2012, to, among 

other things: (a) Enhance the Coaching 

Program offered under the Health Plan’s 

wellness programs; (b) provide new 

biometric screenings under the wellness 

programs; and (c) enhance the Health 

Risk Assessment offered under the 

wellness programs. Additionally, the 

Applicants represent that captive 

reinsurance results in lower premiums 

because the captive does not charge 

‘‘margin.’’ According to the Applicants, 

this, in turn, allows Lilly to create 

additional value in the Plan or lower its 

costs and those of its employees in 

contributory arrangements. 

22. The Applicants represent that the 

proposed exemption is protective of the 

rights of the participants and 

beneficiaries of the Plan because this 

proposed exemption, if granted, will 

require an Independent Fiduciary to 

review and approve the reinsurance 

transaction and the Enhancements. 

Moreover, the Applicants state that the 

Independent Fiduciary will monitor the 

covered transactions on a continuing 

basis to ensure such transactions remain 

in the interests of the Plan, take all 

appropriate actions to safeguard the 

interests of the Plan, and enforce 

compliance with all conditions and 

obligations imposed on any party 

dealing with the Plan. Specifically, this 

proposed exemption will require that 

the Independent Fiduciary analyze the 

subject transactions and render an 

opinion regarding whether certain 

conditions in this proposed exemption 

were satisfied, including that: The Life 

Insurance Plan pays no more than 

adequate consideration for the Optional 

Group Life contracts; the Plan pays no 

commissions with respect to the direct 

sale or reinsurance of such contracts; as 

of January 1, 2012, there is an 

immediate and objectively determined 

benefit to participants and beneficiaries 

of the Plan in the form of increased 

benefits, and if the benefits are 

materially modified, benefits of the 

same approximate value will continue 

in all future years of reinsurance and in 

every renewal of reinsurance; the 

reinsurance arrangement is indemnity 

insurance only; any Fronting Insurer 

will have a financial strength rating of 

‘‘A’’ or better from A.M. Best; the 

Fronting Insurer calculates premiums 

according to formulae that are similar to 

formulae used by other insurers who 

provide comparable Optional Group 

Life coverage under similar programs; 

the premiums charged by the Fronting 

Insurer are reasonable and comparable 

to the premiums charged for the same 

coverage, under similar programs by the 

Fronting Insurer or its competitors who 

have the same or better rating from A.M. 

Best. Finally, the Independent Fiduciary 

will render an opinion about whether 

participants and beneficiaries in the 

Plan received, as of January 1, 2012, an 

immediate and objectively determined 

benefit through the Enhancements, and 

if the Enhancements are materially 

modified, Enhancements of the same 

approximate value in all future years of 

reinsurance and in every renewal of 

reinsurance. 

Summary 

23. In summary, the Applicants 

represent that the proposed reinsurance 

transactions will meet the criteria of 

section 408(a) of the Act since, among 

other things: 

(a) Elco meets the affiliation, 

licensure, certification, and examination 

requirements specified in Section 

II(a)(1)–(5) of this proposed exemption; 

(b) The Life Insurance Plan will pay 

no more than adequate consideration for 

the insurance contracts; 

(c) No commissions will be paid by 

the Life Insurance Plan with respect to 

the direct sale of such contracts or the 

reinsurance thereof; 

(d) Effective January 1, 2012, there 

was an immediate and objectively 

determined benefit to Plan participants 

and beneficiaries in the form of 

increased benefits. If the benefits are 

materially modified, benefit increases of 

the same approximate value, as 

determined by the Independent 

Fiduciary, will continue in all 

subsequent years and in every renewal 

of each contract of reinsurance 

involving Elco and a Fronting Insurer. 

Any such modification in benefits will 

approximate the increase in benefits 

that are effective January 1, 2012; 

(e) In the initial year and in 

subsequent years of coverage provided 

by a Fronting Insurer, the formulae used 

by the Fronting Insurer to calculate 

premiums will be similar to formulae 

used by other insurers providing 

comparable coverage under similar 

programs. Furthermore, the premium 

charge calculated in accordance with 

the formulae will be reasonable and will 

be comparable to the premiums charged 

by the Fronting Insurer and its 

competitors with the same or a better 

rating providing the same coverage 

under comparable programs; 

(f) The Fronting Insurer has a 

financial strength rating of ‘‘A’’ or better 

from A.M. Best, and the reinsurance 

arrangement between the Fronting 

Insurer and Elco will be indemnity 

insurance only; 

(g) The Life Insurance Plan retains an 

Independent Fiduciary or successor to 

such fiduciary to analyze the 

transactions and to render an opinion 

that certain requirements of the 

proposed exemption, if granted, have 

been satisfied; 

(h) Participants and beneficiaries in 

the Plan will receive in subsequent 

years of every contract of reinsurance 

involving Elco and the Fronting Insurer 

the benefit increases effective January 1, 

2012, or benefit increases no less in 

value, as determined by the 

Independent Fiduciary, than the 

objectively determined increased 

benefits such participants and 

beneficiaries received effective January 

1, 2012; 

(i) The Independent Fiduciary will 

monitor the transactions proposed 

herein on behalf of the Plan on a 

continuing basis to ensure such 

transactions remain in the interest of the 

Plan; take all appropriate actions to 

safeguard the interests of the Plan; and 

enforce compliance with all conditions 

and obligations imposed on any party 

dealing with the Plan; and 

(j) The Independent Fiduciary will 

review any contract for, and any 

renewal of, the reinsurance of risks and 

the receipt of premiums therefrom by 

Elco and will determine whether the 

requirements of this proposed 

exemption and the terms of the 

Enhancements, as described herein, 

continue to be satisfied. 

Notice to Interested Persons 

Lilly will provide notice of the 

proposed exemption to all employees 

eligible to participate in the Plan within 

fourteen (14) calendar days of 

publication of the proposed exemption 

in the Federal Register. Lilly will 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 72 / Wednesday, April 15, 2015 / Notices 20255 

18Pursuant to 29 CFR 2510.3–2(d), the New IRA 

is not within the jurisdiction of Title I of the 

Employee Retirement Income Security Act of 1974 

(the Act). However, there is jurisdiction under Title 

II of the Act pursuant to section 4975 of the Code. 

19 It is represented that the Company does not 

have audited financial statements. 

20The first lease between the Company and 

ASCCA expired on April 30, 2013. 

provide the notice to all employees 

eligible to participate in the Plan via 

first-class mail. In addition to the 

proposed exemption, as published in 

the Federal Register, Lilly will provide 

all employees eligible to participate in 

the Plan with a supplemental statement, 

as required, under 29 CFR 2570.43(a)(2). 

The supplemental statement will inform 

the employees eligible to participate in 

the Plan of their right to comment on 

and to request a hearing with respect to 

this proposed exemption. The 

Department must receive all written 

comments and/or requests for a hearing 

within 44 days of the publication of this 

proposed exemption in the Federal 

Register. The Department will make all 

comments available to the public. 

Warning: If you submit a comment, 

EBSA recommends that you include 

your name and other contact 

information in the body of your 

comment, but DO NOT submit 

information that you consider to be 

confidential, or otherwise protected 

(such as Social Security number or an 

unlisted phone number) or confidential 

business information that you do not 

want publicly disclosed. All comments 

may be posted on the Internet and can 

be retrieved by most Internet search 

engines. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Jennifer Brown of the Department, 

telephone (202) 693–8352 (This is not a 

toll-free number.) 

Robert A. Handelman Roth IRA No. 2 (the 

New IRA) Located in Akron, Ohio 

[Application No. D–11798] 

Proposed Exemption 

Based on the facts and representations 

set forth in the application, the 

Department is considering granting an 

exemption under the authority of 

section 4975(c)(2) of the Code and in 

accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (76 

FR 66637, 66644, October 27, 2011). If 

the exemption is granted, 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 proposed 

purchase by the New IRA of a 100% 

ownership interest (the Interest) in RAH 

Properties Mill Street, Ltd. (the 

Company) from Robert A. Handelman 

(Mr. Handelman), the New IRA owner 

and a disqualified person with respect 

to the New IRA,18 provided the 

following conditions are met: 

(a) The purchase is a one-time 

transaction for cash; 

(b) At the time of the purchase, the 

price paid by the New IRA for the 

Interest is equal to the fair market value 

of such Interest, as established by a 

qualified independent appraiser in an 

updated appraisal report as of the date 

of the purchase; 

(c) The terms and conditions of the 

purchase are at least as favorable to the 

New IRA as those available in a 

comparable arm’s length transaction 

with an unrelated third party; 

(d) The New IRA does not pay any 

commissions or other expenses in 

connection with the purchase, including 

the rollover of the cash distribution 

from the Robert A. Handelman Roth IRA 

No. 1 (the Existing IRA) to the New IRA; 

(e) Mr. Handelman pays all 

appropriate taxes that are associated 

with the rollover of the cash distribution 

from the Existing IRA to the New IRA 

in connection with the purchase; and 

(f) Mr. Handelman receives no 

compensation from the New IRA or the 

Existing IRA for his role as manager of 

the Company. 

Summary of Facts and Representations 

1. The Existing IRA is a Roth 

individual retirement account 

established under section 408(a) of the 

Code on May 1, 2012, by Robert A. 

Handelman, the IRA’s sole participant. 

Beneficiaries of the Existing IRA are Mr. 

Handelman’s children: Julie Wesel, 

Susan Masturzo, Sheryl Loudon, Lisa 

Handelman Jones, and Leslie Lopes. 

Fidelity Investments (Fidelity) is the 

Existing IRA’s custodian. As of 

December 31, 2013, the Existing IRA 

had total assets of $760,282.63. 

2. The New IRA is also a Roth 

individual retirement account that was 

established under section 408(a) of the 

Code on May 1, 2012, by Robert A. 

Handelman, the New IRA’s sole 

participant. Beneficiaries of the New 

IRA are Mr. Handelman’s children. 

PENSCO Trust Company, a nondepository trust company, is the New 

IRA’s custodian. Although the New IRA 

currently holds no assets, it will be 

funded within 60 days after the 

exemption is granted. 

3. Mr. Handelman has a 100% 

ownership interest (the Interest) in the 

Company, a limited liability company 

formed on July 14, 1998, and located in 

Akron, Ohio. The Company’s operations 

consist exclusively of leasing 

commercial office real estate in a 

building located at 55 East Mill Street, 

Akron, Ohio (the Property). The 

Property, which is the Company’s sole 

asset, is improved by a two-story brick 

office building that contains 11,448 

square feet of space. The building also 

includes a partially-finished basement. 

The Property is not subject to a 

mortgage. 

As of December 31, 2013, the 

Company had total assets of 

$431,984.25, as reported in the 

Company’s unaudited financial 

statements.19 The Property is carried on 

the Company’s balance sheet at 

$247,314. Mr. Handelman manages the 

Company but he receives no 

compensation from the Company. 

4. Mr. Handelman purchased the 

Property in 1984 for $375,000 from 

Community Federal Savings Loan 

Association, an unrelated party. On 

December 28, 1984, Mr. Handelman, as 

lessor, and Chemstress Consultant 

Company, a company owned by Mr. 

Handelman, as lessee, entered into a 

lease of the Property (the Chemstress 

Lease) commencing on January 1, 1985. 

The Chemstress Lease provided for an 

initial five-year term, with two five-year 

renewal options. On July 31, 1998, Mr. 

Handelman contributed the Property to 

the Company. At the expiration of the 

second lease renewal period, the 

Chemstress Lease was extended on a 

month-to-month basis from January 1, 

2000 until May 31, 2005. The Property 

was vacant from June 1, 2005 until July 

14, 2005. 

5. Since July 14, 2005, the Company 

has leased the Property to the Akron 

Summit County Community Action, Inc. 

(ASCCA), an unrelated party.20 The 

current lease is a three-year lease, which 

runs from May 1, 2013 through April 30, 

2016. The current monthly rent is 

$14,052.90. The lease is also subject to 

two three-year renewal options. 

6. An individual exemption is 

requested from the Department to allow 

the New IRA to purchase the Interest 

from Mr. Handelman. The Interest 

consists of the Property and the 

Company’s rights as lessor under the 

ASCCA lease. To enable the IRA to 

purchase the Interest, Mr. Handelman 

will take a distribution in cash from the 

Existing IRA in the amount of the 

purchase price and will roll over the full 

cash distribution into the New IRA. Mr. 

Handelman represents that he cannot 

use the Existing IRA for the purchase 

because Fidelity, the custodian, cannot 

hold real estate. 

It is represented that Mr. Handelman 

hopes that the New IRA will continue 

for many years to provide for his 

children, whom he has designated as 

the beneficiaries of such IRA. Given 


tkelley on DSK3SPTVN1PROD with NOTICES
20256 Federal Register / Vol. 80, No. 72 / Wednesday, April 15, 2015 / Notices 

these intentions, Mr. Handelman would 

like the New IRA to invest in an asset 

that will continue to generate income 

and appreciation for the benefit of his 

family for the long term. Thus, he 

believes the New IRA’s ownership of the 

Interest will fulfill this goal. Further, 

Mr. Handelman notes that the stock 

market is very volatile and fixed income 

securities currently have very low yields 

with the potential for substantial 

principal depreciation as interest rates 

rise. Therefore, Mr. Handelman does not 

believe other assets such as these will 

provide the New IRA with the long-term 

stability and growth in value that he 

seeks for such IRA. 

7. The New IRA will acquire the 

Interest for the fair market value of such 

Interest, as determined by a qualified 

independent appraiser in an appraisal 

that is updated on the date of the 

purchase. The New IRA will pay cash 

for the Interest and it will not pay any 

commissions or other expenses in 

connection with the purchase, or in 

connection with the rollover of the cash 

distribution from the Existing IRA to the 

New IRA. The terms and conditions of 

the purchase will be at least as favorable 

to the New IRA as those available in a 

comparable arm’s length transaction 

with an unrelated third party. Finally, 

Mr. Handelman will pay all appropriate 

taxes that are associated with the 

transfer of any assets from the Existing 

IRA to the New IRA. 

8. Section 4975(c)(1)(A) of the Code 

prohibits, in part, any direct or indirect 

sale of any property between a plan and 

a disqualified person. Section 

4975(c)(1)(D) of the Code prohibits any 

direct or indirect transfer to, or use by 

or for the benefit of, a disqualified 

person of the income or assets of a plan. 

The term ‘‘disqualified person’’ is 

defined under section 4975(e)(2)(A) of 

the Code to include a person who is a 

fiduciary. Section 4975(e)(3) of the Code 

defines the term ‘‘fiduciary’’ to include, 

in pertinent part, any person who 

exercises any discretionary authority or 

control respecting management or 

disposition of its assets. In addition, 

section 4975(c)(1)(E) of the Code 

prohibits a fiduciary from dealing with 

the income or assets of a plan in the 

fiduciary’s own interest or for his or her 

own account. Finally, section 

4975(e)(1)(B) of the Code defines the 

term ‘‘plan’’ to include an individual 

retirement account described in section 

408(a) of the Code. 

As a fiduciary with respect to the New 

IRA, Mr. Handelman is a disqualified 

person with respect to such IRA under 

section 4975(e)(2)(A) of the Code. 

Accordingly, because Mr. Handelman is 

a disqualified person with respect to the 

New IRA, the proposed purchase by the 

New IRA of Mr. Handelman’s 100% 

Interest in the Company would be a 

transaction prohibited by section 

4975(c)(1)(A) of the Code, and constitute 

a direct transfer to Mr. Handelman of 

the assets of the New IRA in violation 

of section 4975(c)(1)(D) of the Code. In 

addition, the proposed purchase would 

violate section 4975(c)(1)(E) of the Code 

because, as a fiduciary, Mr. Handelman 

would be engaged in a prohibited act of 

self-dealing by dealing with the assets of 

the New IRA for his own interest or his 

own account in connection with the 

purchase. Accordingly, in the absence of 

an administrative exemption, the 

proposed transaction would violate the 

foregoing Code provisions. 

9. The Property underlying the 

Interest has been appraised by Russell L. 

Kitzberger, GAA, RAA, Certified 

General Appraiser of Pointer Appraisal 

Services, LLC (Pointer), which is located 

in Akron, Ohio. Mr. Kitzberger 

represents that he has no familial or 

personal relationship with Mr. 

Handelman or the Company, and that 

Pointer derived less than 1% of its 2013 

annual income and less than 1% of its 

2014 annual income from Mr. 

Handelman. 

In an independent appraisal report 

dated July 19, 2013 (the Property 

Appraisal), Mr. Kitzberger stated that he 

considered the Sales Comparison 

Approach, Income Approach and Cost 

Approach to valuation. Based on the 

sales data in the Property Appraisal, Mr. 

Kitzberger characterized the real estate 

market as a ‘‘buyer’s market,’’ with few 

properties trading due to poor economic 

and general real estate market 

conditions. Therefore, he gave the most 

weight in his valuation of the Property 

to the Income Approach, stating that the 

most probable price the Plan would 

receive on the Property would be 

determined by the purchasing party 

weighing the income production of the 

Property under the current market 

conditions for sale of leased fee estates. 

Based on this valuation, Mr. Kitzberger 

determined that, as of July 10, 2013, the 

Property had a leased fee value of 

$610,000. As of the same date, Mr. 

Kitzberger also determined that the 

Property had a projected lease rate of 

$13.00 per square foot for the first and 

second floor, and $7.00 per square foot 

for the basement area, bringing the 

potential gross annual rental income to 

$99,580 or $8,298 per month. 

In a letter addendum dated November 

11, 2014, Mr. Kitzberger updated the 

Property Appraisal. Mr. Kitzberger 

represents that he completed the update 

to the Property Appraisal in a manner 

similar to the prior report by updating 

the prior information with more recent 

sales, lease and cost data. Based on this 

more recent data, Mr. Kitzberger 

concluded that, as of November 10, 

2014, the fair market value of the 

Property remained at $610,000 and that 

the projected lease rates and rental 

income for the Property remained 

unchanged. 

10. In addition to the Property 

valuation, the Interest has been 

appraised by Jason R. Bogniard, MBA, 

ASA, AVA, EA of Apple Growth 

Partners (Apple Growth), a regional 

business advisory firm of certified 

public accountants and industry 

experts, having expertise in business 

valuation, forensic accounting and 

litigation support services, and 

employee benefit planning. Apple 

Growth has offices in Akron and 

Independence, Ohio. 

Mr. Bogniard certifies that he is 

independent of Mr. Handelman and the 

Company, and that the only services he 

has provided to either are the valuation 

services related to the appraisal of the 

Company. Further, Mr. Bogniard states 

that invoices and/or payment for 

services rendered to Mr. Handelman or 

the Company by Apple Growth 

represented less than 1% of Apple 

Growth’s 2013 gross revenues and less 

than 1% of Apple Growth’s 2014 gross 

revenues. 

In rendering this valuation, Mr. 

Bogniard represents that he considered, 

among other things, the following 

relevant factors, which are specified in 

Revenue Ruling 59–60: (a) The history 

and nature of the business; (b) the 

economic outlook of the United States 

and that of the specific industry in 

particular; (c) the book value of the 

subject entity and the financial 

condition of the business; (d) the 

earning capacity of the entity; (e) the 

dividend-paying capacity of the entity; 

(f) whether or not the firm has goodwill 

or other intangible value; (g) sales of the 

stock and size of the ownership block to 

be valued; and (h) the market price of 

publicly-traded stocks of corporations 

engaged in similar industries or lines of 

business. In addition, Mr. Bogniard 

states that he examined the following 

documents in preparing the valuation of 

the Interest: (a) Federal income tax 

returns for Mr. Handelman and his wife 

for the years 2008 through 2012; (b) tax 

asset detail reports for 2012 and 2013; 

(c) the Property Appraisal; (d) the 

ASCCA lease; and (e) the real estate tax 

assessment for the Property. 

11. In an appraisal report dated 

September 12, 2013 (the Company 

Appraisal), Mr. Bogniard took into 

consideration the Property Appraisal, 

among the other factors listed above, to 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 72 / Wednesday, April 15, 2015 / Notices 20257 

21Mr. Bogniard represented that on a going 

concern basis, earnings power, whether expressed 

in an income or market approach, is normally given 

the predominant consideration of the major factors. 

However, because the Company is a real estate 

holding company holding only a single parcel of 

commercial property, Mr. Bogniard represented that 

he utilized the value derived from the Net Asset 

Value method. 

22See Representation 9 regarding comparable 

rental payments in the Akron, Ohio area. 

23For purposes of this proposed exemption, 

references to section 406 of ERISA should be read 

to refer as well to the corresponding provisions of 

section 4975 of the Code. 

value the Interest. Using the Cost (i.e., 

the Net Asset Value) Approach to 

valuation,21 Mr. Bogniard concluded 

that the Interest had an equity value of 

$610,000 as of July 31, 2013. Adjusting 

the value for lack of marketability, Mr. 

Bogniard determined that the fair 

market value of the Interest was 

$580,000 ($610,000 less a five percent 

discount for lack of marketability, 

rounded), as of the same date. 

In a letter dated November 17, 2014, 

Mr. Bogniard updated the Company 

Appraisal. Based on his review of 

Company financial statements through 

October 31, 2014, Summit County 

Auditor tax appraised values for the 

Property, the most recent Property 

valuation by Pointer, regional economic 

indicators, and cost of capital rates of 

return as of November 17, 2014, Mr. 

Bogniard concluded that the fair market 

value of the Interest remained at 

$580,000. Mr. Bogniard will again 

update the Company Appraisal on the 

date of the purchase. 

12. It is represented that the proposed 

transaction is administratively feasible 

because it will be easy to implement 

and will not require oversight by the 

Department. Additionally, all 

distributions by the Company will be 

made to the New IRA which will have 

control of the distributed funds. 

It is represented that the New IRA’s 

purchase of the Interest is in the interest 

of such IRA, primarily because the 

acquisition would occur in a time of 

historically low commercial real estate 

values that are related to the current 

economic downturn. It is also 

represented that the rent owing to the 

Company under the ASCCA lease is 

favorable when compared to rents being 

collected on similar commercial 

properties.22 Moreover, it is represented 

that the Property’s location in 

downtown Akron should provide the 

New IRA assurance that either the 

current lessee or another lessee will 

lease the Property when the ASCCA 

lease expires on April 30, 2016 because 

market rent for commercial real estate 

has returned to the levels prevalent 

prior to the onset of the global economic 

crisis in late 2008. 

Finally, it is represented that the 

proposed transaction is protective of the 

rights of the participants and 

beneficiaries of the New IRA because 

this is a permissible investment that has 

been properly valued through a recent 

valuation. Further, Mr. Handelman has 

agreed to pay the appropriate taxes in 

connection with the distribution of 

assets from the Existing IRA to the New 

IRA. 

13. In summary, it is represented that 

the proposed transaction will satisfy the 

statutory criteria for an exemption 

under section 4975(c)(2) of the Code 

because: 

(a) The purchase will be a one-time 

transaction for cash; 

(b) At the time of the purchase, the 

price paid by the New IRA for the 

Interest will be equal to the fair market 

value of such Interest, as established by 

a qualified, independent appraiser in an 

updated appraisal report as of the date 

of the purchase; 

(c) The terms and conditions of the 

purchase will be at least as favorable to 

the New IRA as those available in a 

comparable arm’s length transaction 

with an unrelated third party; 

(d) The New IRA will not pay any 

commissions or other expenses in 

connection with the purchase, including 

the rollover of the cash distribution 

from the Existing IRA to the New IRA; 

(e) Mr. Handelman will pay all 

appropriate taxes that are associated 

with the rollover of the cash distribution 

from the Existing IRA to the New IRA 

in connection with the purchase; and 

(f) Mr. Handelman will receive no 

compensation from the New IRA or the 

Existing IRA for his role as manager of 

the Company. 

Notice to Interested Persons 

As Mr. Handelman is the sole 

participant of the New IRA, it has been 

determined that there is no need to 

distribute the Notice of Proposed 

Exemption (the Notice) to interested 

persons. Therefore, comments and 

requests for a hearing must be received 

by the Department within thirty (30) 

days of the date of publication of this 

Notice in the Federal Register. 

All comments will be made available 

to the public. 

Warning: Do not include any 

personally identifiable information 

(such as name, address, or other contact 

information) or confidential business 

information that you do not want 

publicly disclosed. All comments may 

be posted on the Internet and can be 

retrieved by most Internet search 

engines. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Anna Mpras Vaughan of the 

Department, telephone (202) 693–8565. 

(This is not a toll-free number.) 

Roofers Local 195 Pension Fund (the Pension 

Fund) and Roofers Local 195 Joint 

Apprenticeship Training Fund (the Training 

Fund) Located in Cicero, NY 

Exemption Application Nos. D–11809 and L– 

11810 

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, as amended (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 (76 FR 66637, 

66644, October 27, 2011).23 If the 

proposed exemption is granted, the 

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

406(a)(1)(D), 406(b)(1), and 406(b)(2) of 

the Act, shall not apply to the sale (the 

Sale) of a building located at 6200 NYS 

Route 31, Cicero, New York (the 

Building) by the Pension Fund to the 

Training Fund, provided that the 

following conditions have been met: 

(a) At the time of the Sale, the Pension 

Fund receives a one-time cash payment 

in exchange for the Building, equal to 

the fair market value of the Building as 

established in an appraisal (the 

Appraisal) by a qualified, independent 

appraiser, updated on the date of the 

Sale, and provided to the Department no 

later than 60 days from the date of the 

Sale; 

(b) The Training Fund does not 

finance more than 80% of the cost of its 

purchase of the Building, and any 

financing must be with an independent, 

third-party bank (the Bank); 

(c) The Training Fund pays no fees, 

commissions or other expenses 

associated with the Sale, and no 

brokerage commissions associated with 

the Sale may be paid by either the 

Training Fund or the Pension Fund; 

(d) A qualified, independent fiduciary 

(the Independent Fiduciary), acting on 

behalf of the Training Fund, represents 

the Training Fund’s interests for all 

purposes with respect to the Sale, 

including the financing of the Building, 

and must: Determine that it is in the best 

interest of the Training Fund to proceed 

with the Sale; review and approve the 

methodology used in the Appraisal; and 

ensure that such methodology is 

properly applied by the qualified, 

independent appraiser in determining 

the fair market value of the Building on 

the date of the Sale; 


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24The Summary of Facts and Representations is 

based on the Applicant’s representations and does 

not reflect the views of the Department, unless 

indicated otherwise. 

25The Applicant states that, in the context of 

multiemployer plans, the PBGC permits the 

continued administration of the plan by its board 

of trustees. 

(e) The Board of Trustees of the 

Pension Fund (the Pension Trustees), 

prior to entering the Sale, must 

determine that the Sale is feasible, in 

the interest of the Pension Fund, and 

protective of the rights of participants 

and beneficiaries of the Pension Fund; 

(f) The Pension Fund is not a party to 

the commercial mortgage between the 

Training Fund and the Bank; 

(g) Under the terms of the loan 

agreement between the Bank and the 

Training Fund, in the event of a default 

by the Training Fund, the Bank has 

recourse only against the Training 

Fund’s interest in the Building and not 

against the general assets of the Training 

Fund; and 

(h) The terms and conditions of the 

Sale are at least as favorable to each 

Fund as those obtainable in an armslength transaction with an unrelated 

third party. 

Summary of Facts and 

Representations 24

Background 

1. The Roofers Local 195 Pension 

Fund (the Pension Fund) is a terminated 

qualified multiemployer defined benefit 

pension plan established by and 

between the Roofers Contractors’ 

Association, Inc. and the United Union 

of Roofers, Waterproofers and Allied 

Workers, Local Union No. 195 (the 

Union). The Pension Fund previously 

held investments with Madoff 

Investments, Inc. whereby the Pension 

Fund lost most of its value. 

Subsequently, the Pension Plan 

terminated in accordance with section 

4041A(a)(2) of ERISA after finalizing a 

resolution with the Pension Benefit 

Guaranty Corporation (the PBGC). As of 

July 9, 2014, the Pension Fund had no 

active participants, 96 retired 

participants and 160 terminated vested 

participants. There are currently 18 

beneficiaries receiving benefits from the 

Pension Fund. As of June 26, 2014, the 

Pension Fund had approximately 

$857,049 in assets, and liabilities of 

$2,156,354. 

2. The Roofers Local 195 Joint 

Apprenticeship Training Fund (the 

Training Fund) is a multiemployer 

apprenticeship plan established 

pursuant to a collective bargaining 

agreement between the Roofing 

Contractors Association of Central New 

York and the Union for the purpose of 

providing necessary construction 

equipment, qualified instructors, books, 

models, sites where instruction and 

practice on such equipment can be 

available to persons eligible under the 

Training Fund’s program, and related 

benefits. As of July 9, 2014, the Training 

Fund had 223 participants and no 

beneficiaries, as it does not offer any 

kind of death benefits to participants. 

As of June 26, 2014, the Training Plan 

had $949,860 (in cash and investments) 

in assets, and liabilities of $5,212. 

3. According to the Pension Fund and 

the Training Fund (together, the Funds), 

the current members of the boards of 

trustees (the Trustees, or the Applicant) 

of the Pension Fund and the Training 

Fund each include an equal number of 

employer-appointed trustees (Employer 

Trustees) and Union-appointed trustees 

(Union Trustees). Furthermore, the 

Applicant represents that five out of the 

six Trustees on the boards are common 

to each Fund. Finally, the Applicant 

represents that the Training Fund 

contributed to the Pension Fund on 

behalf of some of its employees. 

4. The Applicant represents that the 

Pension Fund has been receiving 

funding for benefits from the PBGC 

since July 2009 in the form of loans. As 

of June 30, 2014, the outstanding loan 

amount, including principal and 

interest, totals $2,178,863.80. The 

PBGC’s involvement also includes an 

ongoing review of plan benefits and 

expenses that are paid with PBGC 

advances.25 On July 28, 2010, the 

Applicant notified the PBGC that a plan 

termination by mass withdrawal had 

occurred as of June 28, 2010, and that 

employers had been assessed 

withdrawal liability. The Applicant 

represents that it has since reached a 

global resolution of funding issues with 

the PBGC and has received approval 

from the PBGC for the proposed 

transactions described herein. 

5. The Pension Fund and the Training 

Fund have also been the subject of two 

investigations by the Department. In this 

regard, on March 26, 2009, the Pension 

Fund was notified that it was the subject 

of an investigation under Title I of 

ERISA by the Department’s Boston 

Regional Office concerning investments 

related to the fraud perpetrated on the 

Pension Fund by Bernard L. Madoff 

Investment Securities LLC. The 

Department found that the Trustees of 

the Pension Fund had breached their 

fiduciary obligations to the Plan and 

violated several provisions of ERISA. 

The Trustees restored approximately 

$34,712 to the Plan, representing certain 

administrative expenses, plus interest, 

associated with the violations. On June 

10, 2011, the Department indicated that 

it had concluded its investigation of the 

Pension Fund and of the activities of its 

Trustees based on their corrective 

actions. 

6. On August 22, 2011, the Applicant 

was notified that the Training Fund was 

the subject of another investigation by 

the Department. In this regard, the 

Applicant voluntarily submitted itself to 

investigation by the Department’s 

Boston Regional Office. The Department 

found that the Training Fund 

reimbursed medical service providers 

for asbestos related physical 

examinations in excess of the maximum 

$125 limit provided in the Plan. By 

letter dated May 29, 2013, the 

Department indicated that it had 

concluded its investigation of the 

Training Fund and of its Trustees, and 

concluded further that based on the 

corrective actions taken by the Trustees, 

including restoration of $8,177.68 to the 

Training Fund, no further action would 

be taken. 

The Sale 

7. The Applicant represents that the 

Pension Fund purchased the real 

property located at 6200 NYS Route 31, 

Cicero, New York (the Building), in 

1999, from unrelated third parties at a 

price of $230,000. The Applicant 

represents further that the Building was 

originally constructed as a State Police 

barracks in 1972. The Building sits on 

1.28 acres of land and is comprised of 

3,575 square feet of class B office space 

and meeting areas, a built-in garage and 

a class C finished basement. Other 

improvements to the property include 

an asphalt-paved parking lot, a chainlink fence enclosed storage area, and a 

one-story wood frame storage shed. 

According to the Applicant, the 

Building was renovated in 1999 by the 

Pension Fund for use as a union hall 

and administrative offices. As of July 29, 

2013, the appraised value of the 

Building was $505,000. 

8. The Applicant represents that, in 

connection with the Pension Fund’s 

financial losses and termination, the 

PBGC has indicated a preference that 

the Pension Fund sell the Building, as 

a sale of the Building would improve 

the liquidity of the Pension Fund and 

allow it to pay benefits. The Trustees of 

the Pension Fund considered PBGC’s 

recommendation and agreed that the 

Building should be sold. 

9. The Applicant represents that the 

Training Fund wishes to purchase the 

Building from the Pension Fund (the 

Sale) in order to maintain the current 

training facilities and avoid any 

disruption in training. Furthermore, the 


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26The Applicant represents that although the 

Pension Fund is terminated, it continues to provide 

administrative services, including making benefit 

payments. Therefore, if this exemption is granted, 

the Pension Fund intends to hereafter lease space 

in the Building from the Training Fund in 

compliance with the requirements of Prohibited 

Transaction Exemption (PTE) 76–1 (41 FR 12740, 

March 26, 1976, as corrected at 41 FR 16620, April 

20, 1976) and PTE 77–10 (42 FR 33918, July 1, 

1977). 

Applicant states that, if the Pension 

Fund were forced to sell the Building to 

an unrelated third party, additional 

costs would be incurred by the Training 

Fund to construct or upgrade new 

property to meet the training needs of 

the roofing industry. Moreover, the 

Applicant states that the Pension Fund 

and other entities intend to lease office 

space in the Building from the Training 

Fund following the Sale, providing a 

stream of income to the Training 

Fund.26 The Applicant represents that 

the proposed price for which the 

Training Fund will purchase the 

Building from the Pension Fund is equal 

to fair market value of the Building, as 

established in an appraisal conducted 

by a qualified independent appraiser 

and updated on the date of the Sale. An 

Independent Fiduciary, Syracuse 

Securities, Inc., is responsible for 

monitoring and approving the 

transaction on behalf of the Training 

Fund. The Independent Fiduciary 

recommends a down-payment of 20% of 

the purchase price with the remaining 

80%, of an amount not to exceed 

$400,000, financed by a commercial 

mortgage. 

10. Section 406(a)(1)(A) of the Act 

prohibits a fiduciary from causing a 

plan to engage in a transaction, if he 

knows or should know that such 

transaction constitutes a direct or 

indirect sale or exchange, or leasing, of 

any property between a plan and a party 

in interest. Section 406(a)(1)(D) of the 

Act prohibits a fiduciary from causing a 

plan to engage in a transaction, if he 

knows or should know that such 

transaction constitutes a direct or 

indirect transfer to, or use by or for the 

benefit of, a party in interest, of any 

assets of a plan. The Applicant states 

that, because the Pension Fund is a 

party in interest to the Training Fund 

under section 3(14)(C) of the Act, the 

Sale would constitute a prohibited 

transaction under sections 406(a)(1)(A) 

and (D) of the Act. Furthermore, section 

406(b)(1) of the Act prohibits a fiduciary 

from dealing with the assets of a plan in 

his own interest or for his own account. 

Section 406(b)(2) of the Act prohibits a 

fiduciary, in his individual or in any 

other capacity, from acting in any 

transaction involving the plan on behalf 

of a party (or represent a party) whose 

interests are adverse to the interests of 

the plan or the interests of its 

participants or beneficiaries. Because 

certain officers of the Pension Fund are 

also Trustees of the Training Fund, and 

they may have an interest in causing the 

Training Fund to engage in the 

transaction with the Pension Fund, the 

Sale may also constitute a prohibited 

transaction under sections 406(b)(1) and 

406(b)(2) of the Act. Therefore, the 

Applicant requests an administrative 

exemption from sections 406(a)(1)(A), 

406(a)(1)(D), 406(b)(1) and 406(b)(2) of 

the Act for the Sale. 

The Appraisal 

11. The Applicant represents that, in 

connection with the proposed Sale, a 

qualified, independent appraiser 

conducted an appraisal of the Building 

(the Appraisal). In its July 19, 2013, 

appraisal report, Pomeroy Appraisal 

Associates, Inc. (Pomeroy) valued the 

Building at $505,000. 

12. Pomeroy represents that Donald 

A. Fisher, the appraiser who signed its 

appraisal report, has worked as an 

appraiser for Pomeroy since 1974. 

Pomeroy represents that Fisher is a New 

York-certified General Appraiser, a 

Member of the Appraisal Institute 

(MAI), and an Accredited Rural 

Appraiser (ARA). Pomeroy represents 

that there is no relationship between 

Pomeroy and the Funds. Pomeroy 

represents and warrants that it meets the 

revenue test for a qualified independent 

appraiser for 2013, the year of the 

appraisal, as the fees received were less 

than 2% of its annual revenues for 

income tax year 2012. 

13. Pomeroy represents that it utilized 

the Sales Comparison and Income 

Capitalization approaches, and arrived 

at a final estimate of value by 

calculating the weighted average of the 

two valuation methods. In using the 

Sales Comparison Approach, Pomeroy 

represents that it evaluated six recent 

sales similar in location, size, age and 

competitive class. Pomeroy adjusted 

those prices to account for the 

disparities in rights conveyed, financing 

terms, conditions of sale, market 

conditions, location, land area, building 

size, building condition and age, 

building utility and design, office space 

percentage, and other features. Based on 

its analysis, Pomeroy represents that it 

derived a value of $140 per square foot 

for the subject property, or $500,000. 

14. In utilizing the Income 

Capitalization Approach, Pomeroy 

represents that it evaluated the leasing 

information from five tenant spaces 

within the North Syracuse marketplace 

which were negotiated within the 

previous five years. Based on its 

analysis, Pomeroy represents that it 

derived a total value of $512,000 for the 

subject property. 

15. Pomeroy represents that based on 

the quality of the information provided 

by the two approaches, they assigned a 

weight of 60% to the Sales Comparison 

Approach and 40% to the Income 

Capitalization Approach, arriving at its 

valuation of the subject property at 

$505,000. 

The Independent Fiduciary’s Report 

16. Syracuse Securities, Inc., was 

retained to serve as the Independent 

Fiduciary to the Training Fund, with 

Laurence Smith as the Lead Consultant, 

pursuant to the Independent Fiduciary 

Services Agreement. The Applicant 

represents that Syracuse Securities has 

acted as a commercial mortgage analyst, 

broker, and mortgage banker since the 

mid-1980s. Syracuse Securities has also 

acted as a residential mortgage banker 

since 1974. The Applicant represents 

that the Independent Fiduciary was 

initially engaged in 2010 when the 

parties first began considering the Sale 

of the Building in accordance with a 

prohibited transaction exemption, and 

when the initial application for the 

corresponding prohibited transaction 

exemption was filed. However, the 

Independent Fiduciary has served the 

Training Fund only on an ‘‘as needed’’ 

basis in connection with the Sale of the 

Building. The Training Fund is paying 

for the services of the Independent 

Fiduciary. 

17. Syracuse Securities represents that 

it previously served as an Independent 

Fiduciary for other ERISA plans in 

connection with real estate transactions. 

Syracuse Securities represents that it 

consulted with ERISA counsel in 

connection with this transaction 

regarding its fiduciary duties. 

18. The Independent Fiduciary 

represents that, prior to this application, 

it had no relationship with the Pension 

Fund or Training Fund. Further, the 

Applicant represents that the 

Independent Fiduciary is not related in 

any way to the Funds, the Union, or any 

employer that contributes to the Funds. 

Syracuse Securities represented and 

warranted that for each year it has been 

retained, from 2010 through 2014, the 

company earned less than 1% of its total 

corporate income from the Applicant 

and any related party. 

19. The Independent Fiduciary’s Lead 

Consultant, Laurence Smith, represents 

that he is a mortgage banker with 32 

years of experience specializing in 

commercial and residential real estate 

mortgages. The Independent Fiduciary 

represents that he has no present or 


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contemplated future interest in, or bias 

with respect to, the Building. 

20. The Independent Fiduciary 

represents that the Training Fund is a 

current tenant in the Building, which 

serves an important purpose in the 

successful operation and financial wellbeing of the Training Fund. Given the 

Appraiser’s valuation of the Building, 

the Independent Fiduciary represents 

that the Sale for a price of $500,000 is 

fair, reasonable and beneficial to the 

Training Fund, its participants and 

beneficiaries. 

21. The Independent Fiduciary 

represents that the Sale furthers the 

interest of the Training Fund and its 

participants and beneficiaries as the 

Training Fund’s purpose is to ‘‘provide 

necessary construction equipment, 

qualified instructors, books, models 

[and] sites where instruction and 

practice on the equipment aforesaid can 

be available to persons eligible under 

this program . . .’’ Further, the 

Independent Fiduciary states that the 

space in the Building is already set up 

to serve the Training Fund’s purposes 

and the Training Fund is a current 

tenant. The Applicant represents that if 

the Pension Fund is required to sell the 

property to a third party, the Training 

Fund will be forced to vacate the 

Building and find a new training 

location, possibly incurring further 

costs. The Independent Fiduciary 

represents that the Training Fund may 

spend more money retrofitting a new 

location for its specific needs than it 

would purchasing the Building. Also, 

the Building is centrally located to serve 

all of the Training Fund’s participants. 

Further, by effectuating this purchase, 

there would be no disruption in services 

or training programs for staff, 

participants, apprentices, and 

contributing employers. 

22. The Independent Fiduciary 

assessed the financials and investment 

portfolio of the Training Fund and 

determined that, based on the 

investment objectives and overall 

purpose of the Training Fund, a 100% 

cash purchase would hamper the overall 

diversification of the Training Fund’s 

assets and adversely impact the 

liquidity of the Training Fund. 

Therefore, the Independent Fiduciary 

recommends a down-payment of 20% of 

the purchase price with the remaining 

80%, of an amount not to exceed 

$400,000, financed by a commercial 

mortgage. As of October 31, 2013, the 

20% down payment constitutes 

approximately 8.74% of the Training 

Fund’s assets. In contrast, if the total 

value of the Building were purchased in 

cash, it would represent approximately 

44% of the Training Fund’s assets. The 

Independent Fiduciary represents that 

the Training Fund has sufficient 

liquidity and funding through hourly 

employer contributions and future 

rental income to support the investment 

in the Building as recommended. The 

Independent Fiduciary further 

represents that employer contributions 

and rental income are anticipated to 

exceed the Training Fund’s monthly 

mortgage payment. 

23. The Independent Fiduciary 

recommended that the new lease 

agreements be entered into for terms of 

at least three years between the current 

tenants and the Training Fund. The 

Independent Fiduciary further 

recommended that the leases contain 

language holding each tenant 

responsible for its percentage share of 

the Building’s common expenses, in 

addition to its respective rent. The 

Independent Fiduciary specified that 

such common expenses do not need to 

include any real estate taxes or capital 

improvement expenses. The 

Independent Fiduciary recommended, 

in accordance with the Pomeroy 

Appraisal Report, that the rents be no 

less than $12.00 per square foot for 

above-ground space and $8.00 per 

square foot for below-ground space. 

Further, the Independent Fiduciary 

recommended that the Pension Fund be 

required to place with the Training 

Fund a security deposit of $5,200, 

equivalent to four months’ rent. 

Statutory Findings 

24. The Applicant represents that the 

requested exemption with respect to the 

Sale is administratively feasible because 

the Sale is a one-time transaction 

between the Pension Fund and the 

Training Fund, which will not require 

continuous or future monitoring by the 

Department. 

The Applicant represents that the Sale 

is in the interest of the Pension Fund, 

the Training Fund, and their 

participants and beneficiaries because it 

will permit the Funds to maintain their 

offices and the training facilities at the 

present location with no disruption in 

services or training. The Applicant 

represents that, if the Pension Fund is 

forced to sell the property to a third 

party, the Training Fund will be forced 

to vacate the Building and find a new 

training location, putting the Union in 

a perilous state. 

The Independent Fiduciary represents 

that the purchase of the Building is a 

prudent investment for the Training 

Fund as the Building should generate 

reasonable income in the form of rent. 

Further, amounts that the Training Fund 

previously expended for rent will now 

be invested in an asset that the Training 

Fund owns and utilizes. Also, the 

purchase furthers the purpose of the 

Training Fund to provide necessary 

construction equipment, instructors, 

books, models and sites for instruction 

and practice on the equipment, as the 

existing facility has been upgraded to 

meet the Training Fund’s specific needs. 

Finally, the Sale will provide the 

Pension Fund with an infusion of cash 

without the payment of any real estate 

commissions, allowing it to pay benefits 

to participants as requested by the 

PBGC. 

The Applicant represents that the Sale 

is protective of the rights of the Training 

Fund as an Independent Fiduciary, 

Syracuse Securities, Inc., has approved 

the Sale and will represent the interests 

of the Training Fund throughout the 

purchase of the Building, including 

additional length of time if warranted. 

Also, a Qualified Independent 

Appraiser appraised the Building for 

purposes of determining the purchase 

price. The Applicant represents that 

objective procedural safeguards, 

including service provider agreements, 

discussion of the merits of the Sale at 

trustees’ meetings, and retention of 

separate counsel for the Sale, have also 

been instituted. 

Summary 

25. In summary, the Applicant 

represents that the proposed exemption 

satisfies the statutory criteria for an 

exemption under section 408(a) of the 

Act for the reasons stated above and for 

the following reasons, among others: 

(a) At the time of the Sale, the Pension 

Fund receives a one-time payment of 

cash equal to the fair market value of the 

Building as established by a qualified 

independent appraiser in an Appraisal 

updated on the date of the Sale; 

(b) The Training Fund may finance up 

to 80% of the purchase cost of the 

Building with an independent, thirdparty bank; 

(c) The Training Fund pays no fees, 

commissions or other expenses 

associated with the Sale; and 

(d) The Independent Fiduciary, acting 

on behalf of the Fund, represents the 

Training Fund’s interests for all 

purposes with respect to the Sale, and: 

(1) Determines, among other things, that 

it is in the best interest of the Training 

Fund to proceed with the Sale; (2) 

reviews and approves the methodology 

used in the Appraisal; and (3) ensures 

that such methodology is properly 

applied by the Appraiser in determining 

the fair market value of the Building on 

the date of the Sale. 


tkelley on DSK3SPTVN1PROD with NOTICES
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1 49 FR 9494 (March 13, 1984), as corrected at 50 

FR 41430 (October 10, 1985), as amended at 70 FR 

49305 (August 23, 2005), and as amended at 75 FR 

38837 (July 6, 2010). 

Notice to Interested Persons 

Notice of the proposed exemption 

will be given to all Union members 

within 15 days of the publication of the 

notice of proposed exemption in the 

Federal Register, by first class U.S. mail 

to the last known address of all such 

individuals, and by posting in the 

Union hall in a prominent location. 

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(a)(2). The 

supplemental statement will inform 

interested persons of their right to 

comment on and to request a hearing 

with respect to the pending exemption. 

Written comments and hearing requests 

are due within 45 days of the 

publication of the notice of proposed 

exemption in the Federal Register. All 

comments will be made available to the 

public. 

Warning: Do not include any 

personally identifiable information 

(such as name, address, or other contact 

information) or confidential business 

information that you do not want 

publicly disclosed. All comments may 

be posted on the Internet and can be 

retrieved by most Internet search 

engines. 

FOR FURTHER INFORMATION CONTACT: 

Erica R. Knox of the Department, 

telephone (202) 693–8644. (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 9th day of 

April, 2015. 

Lyssa E. Hall, 

Director, Office of Exemption Determinations, 

Employee Benefits Security Administration. 

[FR Doc. 2015–08565 Filed 4–14–15; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Prohibited Transaction Exemption 2015– 

06; Application No. D–11827] 

Notice of Exemption Involving BNP 

Paribas, S.A. (BNP or the Applicant); 

Located in Paris, France 

AGENCY: Employee Benefits Security 

Administration, U.S. Department of 

Labor. 

ACTION: Notice of Exemption. 

SUMMARY: This document contains a 

notice of exemption issued by the 

Department of Labor (the Department) 

from certain prohibited transaction 

restrictions of the Employee Retirement 

Income Security Act of 1974, as 

amended (ERISA), and the Internal 

Revenue Code of 1986, as amended (the 

Code). The exemption affects the ability 

of certain entities with specified 

relationships to BNP to continue to rely 

upon the relief provided by Prohibited 

Transaction Class Exemption 84–14. 

DATES: Effective Date: This exemption is 

effective as of the earliest date a 

judgment of conviction against BNP is 

entered in either: (1) Case Number 14– 

cr–00460 (LGS) in the District Court for 

the Southern District of New York; or (2) 

Case Number 2014 NY 051231 in the 

Supreme Court of the State of New 

York, County of New York. 

FOR FURTHER INFORMATION CONTACT: 

Scott Ness, telephone (202) 693–8561, 

Office of Exemption Determinations, 

Employee Benefits Security 

Administration, U.S. Department of 

Labor (these are not toll-free numbers). 

SUPPLEMENTARY INFORMATION: On 

November 26, 2014, the Department of 

Labor (the Department) published a 

notice of proposed exemption in the 

Federal Register at 79 FR 70661, for 

certain entities with specified 

relationships to BNP to continue rely 

upon the relief provided by Prohibited 

Transaction Class Exemption (PTE) 84– 

14,1 notwithstanding judgments of 

conviction against BNP in: (1) Case 

Number 14-cr-00460 (LGS) in the 

District Court for the Southern District 

of New York for conspiracy to commit 

an offense against the United States in 

violation of Title 18, United States 

Code, Section 371, by conspiring to 

violate the International Emergency 

Economic Powers Act, codified at Title 

50, United States Code, Section 1701 et 

seq., and regulations issued thereunder, 

and the Trading with the Enemy Act, 

codified at Title 50, United States Code 

Appendix, Section 1 et seq., and 

regulations issued thereunder; and (2) 

Case Number 2014 NY 051231 in the 

Supreme Court of the State of New 

York, County of New York for falsifying 

business records in the first degree, in 

violation of Penal Law § 175.10, and 

conspiracy in the fifth degree, in 

violation of Penal Law § 105.05(1). 

The proposed exemption contains 

conditions described in the QPAM class 

exemption, as well as a set of additional 

conditions, that must be satisfied in 

order for asset managers with specified 

relationships to BNP to engage in the 

transactions described in the QPAM 

class exemption. The individual 

exemption was requested by BNP 

pursuant to 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 (76 

FR 66637, 66644, October 27, 2011). 

Effective December 31, 1978, section 

102 of the Reorganization Plan No. 4 of 

1978, 5 U.S.C. App. 1 (1996), transferred 

the authority of the Secretary of the 

Treasury to issue administrative 

exemptions under section 4975(c)(2) of 

the Code to the Secretary of Labor. 


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