Federal Register / Vol. 76, No. 155 / Thursday, August 11, 2011 / Notices 49791 

(c) In subsequent years, the formula 

used to calculate premiums by 

Prudential or any successor insurer will 

be similar to formulae used by other 

insurers providing comparable coverage 

under similar programs. Furthermore, 

the premium charge calculated in 

accordance with the formula will be 

reasonable and will be comparable to 

the premium charged by the insurer and 

its competitors with the same or a better 

rating providing the same coverage 

under comparable programs; 

(d) The Plans only contract with 

insurers with a rating of A or better from 

A.M. Best Company. The reinsurance 

arrangement between the insurer and 

EIC will be indemnity insurance only, 

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

liability to the Plans should EIC be 

unable or unwilling to cover any 

liability arising from the reinsurance 

arrangement; 

(e) No commissions, costs or other 

expenses are paid with respect to the 

reinsurance of such contracts; and 

(f) For each taxable year of EIC, the 

gross premiums and annuity 

considerations received in that taxable 

year by EIC for life and health insurance 

or annuity contracts for all employee 

benefit plans (and their employers) with 

respect to which EIC is a party in 

interest by reason of a relationship to 

such employer described in section 

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

exceed 50% of the gross premiums and 

annuity considerations received for all 

lines of insurance (whether direct 

insurance or reinsurance) in that taxable 

year by EIC. For purposes of this 

condition (f): 

(1) the term ‘‘gross premiums and 

annuity considerations received’’ means 

as to the numerator the total of 

premiums and annuity considerations 

received, both for the subject 

reinsurance transactions as well as for 

any direct sale or other reinsurance of 

life insurance, health insurance or 

annuity contracts to such plans (and 

their employers) by EIC. This total is to 

be reduced (in both the numerator and 

the denominator of the fraction) by 

experience refunds paid or credited in 

that taxable year by EIC. 

(2) all premium and annuity 

considerations written by EIC for plans 

which it alone maintains are to be 

excluded from both the numerator and 

the denominator of the fraction. 

For a more complete statement of the 

facts and representations supporting the 

Department’s decision to grant this 

exemption, refer to the notice of 

proposed exemption published on May 

5, 2011 at 76 FR 25721. 

FOR FURTHER INFORMATION CONTACT: Gary 

H. Lefkowitz of the Department, 

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

a toll-free number.) 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under section 

408(a) of the Act and/or section 

4975(c)(2) of the Code does not relieve 

a fiduciary or other party in interest or 

disqualified person from certain other 

provisions 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) This exemption is supplemental to 

and not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transactional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction; and 

(3) The availability of this exemption 

is subject to the express condition that 

the material facts and representations 

contained in the application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC this 4th day of 

August, 2011. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2011–20342 Filed 8–10–11; 8:45 am] 

BILLING CODE 4510–29–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– 

11601, BB&T Asset Management, Inc. 

(BB&T AM); and D–11661, Bayer 

Corporation (Bayer or the Applicant) et 

al.] 

DATES: All interested persons are invited 

to submit written comments or requests 

for a hearing on the pending 

exemptions, unless otherwise stated in 

the Notice of Proposed Exemption, 

within 45 days from the date of 

publication of this Federal Register 

Notice. 

ADDRESSES: Comments and requests for 

a hearing should state: (1) The name, 

address, and telephone number of the 

person making the comment or request, 

and (2) the nature of the person’s 

interest in the exemption and the 

manner in which the person would be 

adversely affected by the exemption. A 

request for a hearing must also state the 

issues to be addressed and include a 

general description of the evidence to be 

presented at the hearing. 

All written comments and requests for 

a hearing (at least three copies) should 

be sent to the Employee Benefits 

Security Administration (EBSA), Office 

of Exemption Determinations, Room N– 

5700, U.S. Department of Labor, 200 

Constitution Avenue, NW., Washington, 

DC 20210. Attention: Application No. 

llll, stated in each Notice of 

Proposed Exemption. Interested persons 

are also invited to submit comments 

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

requests should be sent either by e-mail 

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

(202) 219–0204 by the end of the 

scheduled comment period. The 

applications for exemption and the 

comments received will be available for 

public inspection in the Public 

Documents Room of the Employee 

Benefits Security Administration, U.S. 

Department of Labor, Room N–1513, 

200 Constitution Avenue, NW., 

Washington, DC 20210. 

Warning: If you submit written 

comments or hearing requests, do not 

include any personally-identifiable or 

confidential business information that 

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

requests are posted on the Internet 

exactly as they are received, and they 

can be retrieved by most Internet search 

engines. The Department will make no 

deletions, modifications or redactions to 


srobinson on DSK4SPTVN1PROD with NOTICES
49792 Federal Register / Vol. 76, No. 155 / Thursday, August 11, 2011 / Notices 

1 71 FR 20262 (April 19, 2006). 

2 71 FR 20135 (April 19, 2006). 

the comments or hearing requests 

received, as they are public records. 

SUPPLEMENTARY INFORMATION: 

Notice to Interested Persons 

Notice of the proposed exemptions 

will be provided to all interested 

persons in the manner agreed upon by 

the applicant and the Department 

within 15 days of the date of publication 

in the Federal Register. Such notice 

shall include a copy of the notice of 

proposed exemption as published in the 

Federal Register and shall inform 

interested persons of their right to 

comment and to request a hearing 

(where appropriate). 

The proposed exemptions were 

requested in applications filed pursuant 

to section 408(a) of the Act and/or 

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

accordance with procedures set forth in 

29 CFR part 2570, Subpart B (55 FR 

32836, 32847, August 10, 1990). 

Effective December 31, 1978, section 

102 of Reorganization Plan No. 4 of 

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

the authority of the Secretary of the 

Treasury to issue exemptions of the type 

requested to the Secretary of Labor. 

Therefore, these notices of proposed 

exemption are issued solely by the 

Department. 

The applications contain 

representations with regard to the 

proposed exemptions which are 

summarized below. Interested persons 

are referred to the applications on file 

with the Department for a complete 

statement of the facts and 

representations. 

BB&T Asset Management, Inc. (BB&T 

AM) 

Located in Winston-Salem, North 

Carolina 

[Application No. D–11601] 

Proposed Exemption 

Based on the facts and representations 

set forth in the application, the 

Department is considering granting the 

following exemption under the 

authority of Code section 4975(c)(2), 

and in accordance with the procedures 

set forth in 29 CFR part 2570, subpart 

B (55 FR 32836, 32847, August 10, 

1990), as follows: 

Section I: Covered Transactions 

If the proposed exemption is granted, 

the sanctions resulting from the 

application of Code section 4975, by 

reason of Code section 4975(c)(1)(A) and 

(C)–(F), shall not apply, effective April 

30, 2002 until December 27, 2005, to (1) 

Directed trades by BB&T AM and its 

successors in interest (together, the 

Applicant) as an investment manager 

and investment adviser to certain plans, 

subject to Code section 4975, but not 

subject to Title I of ERISA (the IRAs), 

which resulted in the IRAs purchasing 

or selling securities from Scott & 

Stringfellow, LLC (S&S), an affiliated 

broker-dealer of BB&T AM (collectively, 

the Transactions); and (2) compensation 

paid by the IRAs to S&S in connection 

with the Transactions (the Transaction 

Compensation). 

This proposed exemption is subject to 

the conditions set forth below in 

Sections II and III. 

Section II: Specific Conditions 

(a) The Transactions and the 

Transaction Compensation were 

corrected (1) pursuant to the 

requirements set forth in the 

Department’s Voluntary Fiduciary 

Correction Program (the VFC Program) 1

and (2) in a manner consistent with 

those transactions described in the 

Applicant’s VFC Program application, 

dated January 22, 2010 (the VFC 

Program Application), that were 

substantially similar to the Transactions 

but that involved plans described in 

Code section 4975(e)(1) and subject to 

Title I of ERISA (the Qualified Plan 

Transactions). 

(b) The Applicant received a ‘‘noaction letter’’ from the Department in 

connection with the Qualified Plan 

Transactions described in the VFC 

Program Application. 

(c) The fair market value of the 

securities involved in the Transactions 

was determined in accordance with 

Section 5 of the VFC Program. 

(d) The terms of the Transactions and 

the Transaction Compensation were at 

least as favorable to the IRAs as the 

terms generally available in arm’s length 

transactions between unrelated parties. 

(e) The Transactions and Transaction 

Compensation were not part of an 

agreement, arrangement or 

understanding designed to benefit a 

disqualified person, as defined in Code 

section 4975(e)(2). 

(f) The Applicant did not take 

advantage of the relief provided by the 

VFC Program and Prohibited 

Transaction Exemption 2002–51 2 (PTE 

2002–51) for three (3) years prior to the 

date of the Applicant’s submission of 

the VFC Program Application. 

Section III: General Conditions 

(a) The Applicant maintains, or 

causes to be maintained, for a period of 

six (6) years from the date of any 

Transaction such records as are 

necessary to enable the persons 

described in Section III(b)(1), to 

determine whether the conditions of 

this exemption have been met, except 

that: 

(1) A separate prohibited transaction 

shall not be considered to have occurred 

if, due to circumstances beyond the 

control of Applicant, the records are lost 

or destroyed prior to the end of the sixyear period; and 

(2) No disqualified person with 

respect to an IRA, other than Applicant, 

shall be subject to excise taxes imposed 

by Code section 4975, if such records 

are not maintained, or are not available 

for examination, as required by Section 

III(b)(1). 

(b)(1) Except as provided in Section 

III(b)(2), the records referred to in 

Section III(a) are unconditionally 

available at their customary location for 

examination during normal business 

hours by: 

(A) Any duly authorized employee or 

representative of the Department, the 

Internal Revenue Service, or the 

Securities and Exchange Commission; 

(B) Any fiduciary of any IRA that 

engaged in a Transaction, or any duly 

authorized employee or representative 

of such fiduciary; or 

(C) Any owner or beneficiary of an 

IRA that engaged in a Transaction or a 

representative of such owner or 

beneficiary. 

(2) None of the persons described in 

Sections III(b)(1)(B) and (C) shall be 

authorized to examine trade secrets of 

Applicant, or commercial or financial 

information which is privileged or 

confidential. 

(3) Should Applicant refuse to 

disclose information on the basis that 

such information is exempt from 

disclosure, Applicant shall, by the close 

of the thirtieth (30th) day following the 

request, provide a written notice 

advising that person of the reasons for 

the refusal and that the Department may 

request such information. 

Effective Date: If granted, this 

proposed exemption will be effective 

from April 30, 2002 until December 27, 

2005. 

Summary of Facts and Representations 

1. The Applicant consists of BB&T 

AM and its successors in interest, BB&T 

AM LLC and Sterling Capital 

Management LLC (SCM LLC). BB&T AM 

was a wholly owned subsidiary of BB&T 

Corporation, a large financial 

institution, headquartered in WinstonSalem, North Carolina. On September 9, 

2010, BB&T AM was reorganized as 

BB&T AM LLC. On October 1, 2010, 

BB&T AM LLC was merged into SCM 

LLC. 


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On September 30, 2010, BB&T AM 

LLC had total assets under management 

of $17.3 billion. As of December 31, 

2010, BB&T Corporation had total assets 

of approximately $157 billion. 

2. Virginia Investment Counselors, 

Inc. (VIC) of Norfolk, Virginia is a 

former asset manager and investment 

adviser to the IRAs and certain qualified 

plans described in Code section 

4975(e)(1) and subject to Title I of 

ERISA (collectively, the Plans). In such 

capacity, VIC was granted discretionary 

investment authority with respect to 

such Plans by the Plans’ respective plan 

administrators and beneficial owners. 

On April 30, 2002, VIC was acquired by 

the Applicant, i.e., BB&T AM, (the 

Corporate Transaction) and, thereafter, 

became a division of the Applicant. 

Prior to the date of the Corporate 

Transaction, VIC was an unrelated party 

to the Applicant. 

3. S&S is a registered broker-dealer. At 

all times relevant hereunder, S&S was a 

wholly owned subsidiary of BB&T 

Corporation. 

4. Prior to the Corporate Transaction, 

VIC directed trades that resulted in the 

Plans purchasing securities from the 

inventory of S&S or selling securities to 

S&S. Because VIC and S&S were 

unrelated parties at that time, these 

types of transactions were not 

prohibited under ERISA or the Code. 

5. Following the consummation of the 

Corporate Transaction, from April 30, 

2002 to the close of 2006, trading 

between VIC (now as a division of BB&T 

AM) and S&S with respect to the Plans 

continued in the same arm’s length 

manner as before the Corporate 

Transaction. Such continuation was 

inadvertent, and it resulted solely from 

VIC’s failure to identify S&S as a 

disqualified person. During this time 

period, the Applicant directed 103 IRAs 

to purchase bonds from S&S 185 times, 

for an aggregate purchase price of 

$3,256,925 (the Bond Purchase 

Transactions), and 10 IRAs to sell bonds 

to S&S 13 times, for an aggregate sales 

price of $147,640 (the Bond Sale 

Transactions). The Applicant also 

directed one transaction in which an 

IRA purchased a stock from S&S, for a 

purchase price of $29,222 (the Stock 

Purchase Transaction) and 4 

Transactions in which an IRA sold stock 

to S&S, for a sales price of $133,209 (the 

Stock Sale Transactions and, 

collectively, the Bond Purchase 

Transactions, the Bond Sale 

Transactions, the Stock Purchase 

Transaction and Stock Sale Transactions 

being the Transactions). The last 

Transaction occurred on December 27, 

2005. 

6. The Transactions caused the 

payment of compensation to S&S 

(Transaction Compensation). With 

respect to Bond Purchase Transactions 

and Bond Sale Transactions, S&S’ 

compensation was reflected in the 

purchase price of the applicable bond. 

That is, S&S was compensated only 

through a ‘‘mark-up’’ of the bond price. 

With respect to the Stock Purchase 

Transaction and the Stock Sale 

Transactions, separate, identifiable 

commissions and fees totaling $829 

were charged by S&S. 

7. The Applicant seeks relief with 

respect to the Transactions and with 

respect to the payment of the 

Transaction Compensation. Specifically, 

the Applicant believes that: (a) The 

purchase and sale of securities between 

the IRAs and S&S was prohibited by 

Code section 4975(c)(1)(A); (b) S&S’ 

provision of brokerage services to the 

IRAs was prohibited by Code section 

4975(c)(1)(C); (c) both the Transactions 

and the payment of Transaction 

Compensation were prohibited by Code 

section 4975(c)(1)(D); and (d) the 

decision by VIC, in its role as fiduciary, 

to cause the IRAs to enter into the 

Transactions and pay the Transaction 

Compensation to S&S was prohibited by 

Code section 4975(c)(1)(E) and (F). The 

Applicant believes that if the proposed 

exemption is not granted the IRAs 

would be subject to hardship resulting 

from the uncertainty of not having the 

prohibited transactions outlined herein 

resolved. Further, the IRAs would be 

subject to additional hardship if the 

proposed exemption is denied as a 

result of the resultant uncertainty 

regarding the correction methodology 

applied by the Applicant. 

8. The Applicant represents that as 

soon as the Transactions and the 

Qualified Plan Transactions were 

discovered it began the correction 

process. The Applicant corrected the 

Qualified Plan Transactions pursuant to 

the requirements set forth in the VFC 

Program. The Applicant filed a VFC 

Program Application, dated January 22, 

2010, with respect to the Qualified Plan 

Transactions, and it received a no-action 

letter from the Department, dated 

August 31, 2010, with respect to the 

Qualified Plan Transactions. 

9. While the Qualified Plan 

Transactions were properly corrected 

under the VFC Program, the Applicant 

was not able to similarly correct the 

Transactions and the Transaction 

Compensation. Despite being 

substantially similar to the Qualified 

Plan Transactions, the Transactions and 

the Transaction Compensation are 

ineligible for relief under the VFC 

Program and PTE 2002–51 because they 

involved IRAs which are not covered 

under Title I of ERISA. The Applicant, 

however, believes that granting relief 

pursuant to the proposed exemption is 

consistent with the Department’s 

statement that ‘‘[the VFC Program] does 

not foreclose its future consideration of 

individual exemption requests of 

transactions involving IRAs that are 

outside the scope of relief provided by 

the VFC Program and the class 

exemption under circumstance where, 

for example, a financial institution 

received a no action letter applicable to 

plans subject to [the VFC Program] for 

a transaction(s) that involved both plans 

and IRAs.’’ 71 FR 20135 (April 19, 

2006). 

10. Consistent with the Department’s 

statement, the Applicant represents that 

the Transactions were corrected 

pursuant to the requirements set forth in 

the VFC Program and in a manner 

consistent with the Applicant’s VFC 

Program Application, with such 

representation made in the Applicant’s 

exemption application, dated January 

22, 2010, under penalty of perjury. In 

this regard, the Applicant corrected the 

Transactions in the manner generally 

described below: 

(a) With respect to the Bond Purchase 

Transactions, since bonds are debt 

instruments, the Applicant corrected the 

Bond Purchase Transactions, based on 

economic similarity to a loan 

transaction correction, under the 

procedures for loans made at a fair 

market interest rate pursuant to Section 

7.2 of the VFC Program. The correction 

method for a loan, which is set forth in 

Section 7.2(a)(2) of the VFC program, is 

for the party in interest to pay back the 

loan in full, including any prepayment 

penalties. Section 7.2(a)(2) also requires 

that an independent commercial lender 

confirm that the loan was made at a fair 

market interest rate for a loan with 

similar terms to a borrower of similar 

creditworthiness. The Applicant 

represents that it satisfied the 

requirements under Section 7.2(a)(3) of 

the VFC Program by means of a written 

report prepared by Independent 

Fiduciary Services, Inc. (IFS), an 

independent fiduciary services firm, 

which among other things, compared 

the actual purchase price of transactions 

to a written confirmation of the market 

price on the day of each Bond Purchase 

Transaction (or the next date a price was 

available) obtained from two 

independent pricing services (Standard 

& Poor’s JJ Kenny Pricing Service and 

Estate Valuation and Pricing Systems) 

selected by IFS. 

(b) With respect to the Bond Sale 

Transactions and Stock Sale 

Transactions, the Applicant corrected 


srobinson on DSK4SPTVN1PROD with NOTICES
49794 Federal Register / Vol. 76, No. 155 / Thursday, August 11, 2011 / Notices 

these Transactions under the procedures 

for sale of an asset to a party in interest 

under Section 7.4(b) of the VFC 

Program. Section 7.4(b)(2)(i) of the VFC 

Program generally requires that the asset 

be repurchased from the party in 

interest at the lower of the price for 

which it originally sold the property or 

the fair market value (FMV) of the 

property at the time of correction. As an 

alternative, section 7.4(b)(2)(ii) of the 

VFC Program provides that a plan may 

receive a cash settlement of the 

‘‘Principal Amount,’’ defined as the 

excess of the FMV of the asset at the 

time of sale over the sales price, plus 

‘‘Lost Earnings,’’ which is generally 

defined as the approximate amount that 

would have been earned by a plan on 

the Principal Amount but for the 

prohibited transaction, provided, that, 

an independent fiduciary determines 

that the applicable Plan would receive 

a greater benefit than by repurchase. 

It was impractical or impossible to 

repurchase the bonds in the Bond Sale 

Transactions. This was due to the fact 

that some of the bonds were no longer 

available because they had been called, 

matured, were thinly traded or not in 

the inventory of the Applicant or its 

affiliates. Further, because the 

Applicant no longer served as 

investment adviser to the majority of the 

IRAs at the time of correction, the 

Applicant did not believe it was in a 

position to effect the repurchase of the 

bonds by the IRAs. Therefore, the 

Applicant corrected the Bond Sale 

Transaction by paying the IRAs the 

Principal Amount plus Lost Earnings 

from the time of the Transaction. 

For the Stock Sale Transactions, the 

IRA was given the option of 

repurchasing the stock at the price 

determined under Section 7.4(b) of the 

VFC Program or receiving a cash 

settlement amount of the greater of the 

cash settlement amount determined 

under Section 7.4(b) or the excess, if 

any, of the FMV of the stock as of the 

date of correction over the price for 

which it originally sold the stock (which 

is the economic equivalent to 

repurchasing the security at the price 

determined under Section 7.4(b) of the 

VFC Program). 

(c) With respect to the Stock Purchase 

Transaction, the Applicant corrected the 

Stock Purchase Transaction under the 

procedures for the purchase of an asset 

from a party in interest pursuant to 

Section 7.4(a) of the VFC Program. 

Section 7.4(a) generally requires that the 

asset be sold back to the party in interest 

or to a person who is not a party in 

interest for a price at least equal to the 

greater of (1) The FMV of the asset at the 

time of resale, without reduction for the 

costs of sale, or (2) the original purchase 

price, plus Lost Earnings. As an 

alternative, the asset may be retained 

along with a payment in the amount of 

the difference between the original 

purchase price paid and the FMV of the 

asset at the time of the purchase, plus 

lost earnings. Since the IRA involved in 

the Stock Purchase Transaction was no 

longer a client of the Applicant at the 

time of correction, the IRA was deemed 

to have disposed of the stock at the FMV 

of the stock on the date the IRA closed 

its account with the Applicant. The IRA 

was paid a corrective payment in the 

amount of the greater of (1) the original 

purchase price, plus Lost Earnings 

calculated through the time the IRA’s 

account closed with the Applicant, less 

the FMV of the stock at the time of the 

deemed disposition or (2) any excess of 

the original purchase price over the 

FMV of the stock at the time of 

purchase, plus Lost Earnings on such 

amount calculated through the date of 

correction. 

11. With respect to the Applicant’s 

correction of the Transactions, (a) The 

Applicant took into account all 

transaction costs (e.g., Transaction 

Compensation), if any, paid by the IRAs 

in calculating the applicable Principal 

Amount as defined under the VFC 

Program; (b) Section 5 of the VFC 

Program was followed to make fair 

market value determinations; and (c) the 

Applicant engaged an independent 

certified public accounting firm to 

calculate the appropriate correction 

payments. Since the bonds in the Bond 

Sale Transactions did not have a 

generally recognized FMV, the FMVs of 

the bonds were determined pursuant to 

a written report prepared by IFS 

comparing the actual purchase price of 

transactions to written confirmations of 

the market price on the applicable date 

from independent pricing services 

selected by IFS. For the Stock Purchase 

Transaction and the Stock Sale 

Transactions, the FMV of the stocks 

involved were determined using the 

average value of the security on the 

generally recognized market for the 

security on the date of the applicable 

transaction as reported by an 

independent pricing service. 

12. The Applicant represents that 

‘‘Restoration of Profits,’’ as defined 

under the VFC Program, did not apply 

with respect to the Transactions because 

no amounts were used for a specific 

purpose such that a profit was 

determinable. 

13. The Applicant represents that it 

sent each IRA involved in a Transaction 

a letter describing the Transaction(s) 

applicable to the IRA and, where 

appropriate, a check for the correction 

amount. 

14. The Applicant believes that the 

Transactions were inadvertent and 

resulted in the IRAs receiving at least a 

market yield-to-maturity with respect to 

the Bond Purchase Transactions or at 

least the market price with respect to 

Bond Sale Transactions, Stock Purchase 

Transaction and Stock Sale Transactions 

because the Applicant and S&S operated 

as independently managed entities and, 

as a result of the foregoing, the terms of 

the Transactions were at least as 

favorable to the IRAs as the terms 

generally available in arm’s length 

transactions between unrelated parties. 

15. The Applicant represents that it 

has not taken advantage of the relief 

provided by the VFC Program and PTE 

2002–51 for the three (3) years prior to 

the date of the Applicant’s submission 

of the VFC Program Application, and 

that the Transactions were not part of an 

agreement, arrangement or 

understanding designed to benefit a 

disqualified person. 

16. The Applicant represents that the 

proposed exemption is: (a) 

Administratively feasible because the 

Applicant has corrected the 

Transactions pursuant to the 

requirements set forth in the VFC 

Program, has obtained relief under the 

VFC Program for the Qualified Plan 

Transactions and has put procedures in 

place to ensure that no similar 

Transactions occur in the future; (b) in 

the interests of the affected IRAs and 

their owners and beneficiaries because 

the Transactions have been corrected 

pursuant to the procedures set forth in 

the VFC Program, which are designed to 

ensure that the corrections are made in 

a manner that is in the interests of the 

IRAs and their owners and beneficiaries; 

and (c) protective of the rights of the 

owners and beneficiaries of the IRAs 

because the requested relief is only with 

respect to past transactions, which the 

Applicant believes were effectively 

conducted on an arm’s length basis, that 

have already been effectively unwound 

pursuant to the requirements set forth in 

the VFC Program. 

17. In summary, the Applicant 

represents that the Transactions and the 

Transaction Compensation satisfy the 

statutory criteria for an administrative 

exemption contained in Code section 

4975(c)(2) because, among other things: 

(a) The Transactions and Transaction 

Compensation were substantially 

similar to the Qualified Plan 

Transactions; (b) the Transactions and 

Transaction Compensation were 

corrected pursuant to the requirements 

set forth in the VFC Program and in a 

manner similar to those described in the 


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Federal Register / Vol. 76, No. 155 / Thursday, August 11, 2011 / Notices 49795 

3For purposes of this proposed exemption, 

references to the provisions of Title I of the Act, 

unless otherwise specified, refer also to the 

corresponding provisions of the Code. 

4Section 436(d)(3)(C) of the Code and section 

206(g)(3)(C) of the Act provide that if the AFTAP 

is at least 60% but less than 80%, a single employer 

defined benefit plan may not pay a prohibited 

payment to the extent the payment exceeds the 

lesser of (1) 50% of the amount of the payment that 

would be paid if the restriction did not apply, or 

(2) the present value, determined under guidance 

provided by the Pension Benefit Guaranty 

Corporation, of the maximum guarantee with 

respect to the participant under section 4022 of the 

Act. 

Applicant’s VFC Program Application; 

(c) the Applicant received a ‘‘no-action 

letter’’ from the Department in 

connection with Applicant’s VFC 

Program Application; (d) the FMVs of 

the IRA bonds and stocks involved in 

the Transactions were determined in 

accordance with Section 5 of the VFC 

Program; (e) the terms of the 

Transactions and the Transaction 

Compensation were at least as favorable 

to the IRAs as the terms generally 

available in arm’s-length transactions 

between unrelated parties; (f) the 

Transactions and Transaction 

Compensation were not part of an 

agreement, arrangement or 

understanding designed to benefit a 

disqualified person; and (g) the 

Applicant did not take advantage of the 

relief provided by the VFC Program and 

PTE 2002–51 for three (3) years prior to 

the date of the Applicant’s submission 

of the VFC Program Application. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Brian Shiker of the Department, 

telephone (202) 693–8552. (This is not 

a toll-free number.) 

Bayer Corporation (Bayer or the 

Applicant) 

Located in Pittsburgh, PA 

[Application No. D–11661] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the Act 

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

in accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (55 

FR 32836, 32847, August 10, 1990).3 If 

the exemption is granted, the 

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

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

sanctions resulting from the application 

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

Code, shall not apply, effective 

September 15, 2011, to the one-time, in 

kind contribution (the Contribution) of 

certain U.S. Treasury Bills (the 

Securities) to the Bayer Corporation 

Pension Plan (the Plan) by the 

Applicant, a party in interest with 

respect to the Plan; provided that the 

following conditions are satisfied: 

(a) In addition to the Securities, Bayer 

contributes to the Plan, by September 

15, 2011, such cash amounts as are 

needed to allow the Plan to attain an 

Adjusted Funding Target Attainment 

Percentage (AFTAP) of 90%, as 

determined by the Plan’s actuary (the 

Actuary); 

(b) The fair market value of the 

Securities is determined by Bayer on the 

date of the Contribution (the 

Contribution Date) based on the average 

of the bid and ask prices as of 3 p.m. 

Eastern Time, as quoted in The Wall 

Street Journal on the Contribution Date; 

(c) The Securities represent less than 

20% of the Plan’s assets. 

(d) The terms of the Contribution are 

no less favorable to the Plan than those 

negotiated at arm’s length under similar 

circumstances between unrelated 

parties; 

(e) The Plan pays no commissions, 

costs or fees with respect to the 

Contribution; and 

(f) The Plan fiduciaries review and 

approve the methodology used to value 

to the Securities and ensure that such 

methodology is properly applied in 

determining the fair market value of the 

Securities. 

Effective Date: If granted, this 

proposed exemption will be effective as 

of September 15, 2011. 

Summary of Facts and Representations 

Parties to the Proposed Transaction 

1. Bayer, headquartered in Pittsburgh, 

PA, is a holding company for the 

business interests of Bayer AG in the 

United States. Bayer AG is an 

international health care, nutrition and 

high-tech materials group based in 

Leverkusen, Germany. In North 

America, Bayer had 2010 net sales of 

approximately $10.86 billion and 

employed 16,400 at year end. Bayer 

sponsors the Plan. 

2. The Plan is a defined benefit 

pension plan. As of January 1, 2010, 

which is the most recent date for which 

participant and Plan financial 

information are available, the Plan had 

34,766 participants and beneficiaries 

and total assets of $2,126,444,442. The 

Plan also had total liabilities of 

$2,354,042,112 as of this date. 

3. The Bayer Corporation Master Trust 

(the Master Trust) holds the assets of the 

Plan and five other defined benefit 

plans (collectively, the ‘‘Plans’’) 

sponsored by Bayer. The Bayer Trust 

Investment Committee (the Committee) 

is the named fiduciary with respect to 

the Master Trust. Bayer serves as the 

Plan administrator for the Plans. Mellon 

Bank, N.A. serves as the trustee for the 

Plans. 

Plan Funding for Plan Year 2011 

4. The Applicant represents that the 

Plans participating in the Master Trust 

are historically funded on an AFTAP 

funding level ranging from 90% to 96%. 

In an actuarial report (the Actuarial 

Report) dated September 30, 2010, 

Towers Watson, the Plan’s Actuary, 

stated that the Plan’s AFTAP as of 

January 1, 2009 was 90% and as of 

January 1, 2010, it was 90.08%. 

5. The Actuarial Report also provided 

for the Plan’s minimum contribution 

payment for January 14, 2011 and 

September 15, 2011. In compliance with 

the Actuarial Report, Bayer made its 

scheduled minimum cash contribution 

payment to the Plan of $3,499,721 as of 

January 11, 2011. Should Bayer make its 

next scheduled required minimum cash 

contribution payment of $12,953,054 on 

September 15, 2011, the Applicant notes 

that the Plan’s AFTAP would fall below 

80% (as measured on January 1, 2011). 

The Applicant explains that because of 

a prior year loss in 2008 of 28% to the 

Plan, the Plan’s AFTAP would fall 

below 80% if Bayer makes only its 

required minimum contribution for 

2011. 

6. As a result, the Applicant explains 

that the benefit restrictions of sections 

206(g) of the Act and 436(d)(3) of the 

Code 4 would be triggered upon the 

Actuary’s certification of the 2011 

Actuarial Report. Such restrictions 

would limit Plan lump sum payments to 

50% of the value of a participant’s 

benefit and would defer Plan Social 

Security level income payouts. These 

measures could harm current Plan 

participants nearing benefit 

commencement. 

7. The Applicant represents that these 

benefit restrictions would affect a 

significant number of Plan participants. 

With respect to lump sum payments, the 

Applicant states that approximately 

3,500 active and deferred participants in 

the Plan are eligible to elect a lump sum 

upon either retirement or the time of 

benefit commencement. With respect to 

Social Security level income benefit 

elections, the Applicant explains that 

5,100 active and deferred vested Plan 

participants are eligible to make such 

elections upon retirement or at the time 

of benefit commencement. 

Contribution of the Securities 

8. On December 17, 2010, Bayer, in its 

corporate capacity, purchased the 

Securities for $299,302,083.30. The 

CUSIP number for the Securities is 

9127952P5. The Applicant represents 


srobinson on DSK4SPTVN1PROD with NOTICES
49796 Federal Register / Vol. 76, No. 155 / Thursday, August 11, 2011 / Notices 

that Bayer purchased the Securities on 

the open market through its broker, 

Citizens Investment Services, an 

unrelated party. The Securities will 

mature on November 17, 2011, with a 

value of $300,000,000.00 in six 

denominations each of $50,000,000. The 

Securities have an effective annual yield 

of 0.25%. The Securities also represent 

approximately 12.2% of the Plan’s 

assets. 

On January 21, 2011, the Committee 

determined that contributing the 

Securities to the Plan on a one-time 

basis would benefit the Plan’s 

participants. The Committee also 

determined that the Securities would 

give the Master Trust a safe and liquid 

investment without additional 

transactions costs, would help maintain 

the Plan’s funding level and would 

prevent potential benefit restrictions 

mentioned above. Furthermore, the 

proposed Contribution is substantially 

similar to contributing cash since the 

Securities are considered cash 

equivalents. 

9. The proposed Contribution would 

also benefit Bayer by allowing it to issue 

public debt at a lower cost. The 

Applicant states that its credit rating 

impacts the interest rate payable when 

it borrows. The Applicant represents 

that a full cash contribution, which is 

reported on its financial statements as a 

use of operating gross cash flow, would 

have a negative impact on the financial 

ratios calculated by credit rating 

agencies. If its credit rating is lowered, 

the Applicant explains that its cost of 

borrowing could substantially increase. 

However, unlike a full cash contribution 

to the Plan, the Applicant indicates that 

the proposed Contribution is not 

reported as a use of operating cash flow. 

Accordingly, the Applicant maintains 

that the proposed Contribution would 

not have a negative impact on its credit 

rating. 

Valuation of the Securities 

10. As of March 31, 2011, the 

Applicant represents that the fair market 

value of the Securities was 

$299,451,000. The Applicant states that 

it applied the average bid and ask price 

of .183%, as of 3 p.m. on March 31, 

2011, as quoted in The Wall Street 

Journal, to obtain a discount value of 

$549,000.00. The Applicant explains 

that it then applied the discount to the 

face value of the Securities at maturity 

to obtain $299,451,000, as the fair 

market value as of March 31, 2011. 

11. The fair market value price of the 

Securities contributed to the Plan will 

be based on its value on the 

Contribution Date. The Applicant 

represents it will select the Contribution 

Date on which The Wall Street Journal 

publishes the bid and ask price for U.S. 

Treasury Bills that mature on November 

17, 2011. The Applicant states that it 

will average the bid and ask price as of 

3 p.m. Eastern Time, as published in 

The Wall Street Journal, to determine 

the appropriate discount. The Applicant 

also explains that it will then apply the 

discount to the Securities to determine 

the fair market value on the 

Contribution Date. 

Request for Exemptive Relief 

12. The Applicant requests exemptive 

relief from the Department for the 

proposed Contribution which represents 

an in kind contribution to the Plan from 

the Applicant, a party in interest, that 

would violate sections 406(a)(1)(A) of 

the Act. The Applicant, which is a 

fiduciary, is causing both a sale or 

exchange between a party and interest 

and the Plan prohibited by section 

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

states that the proposed Contribution 

also would violate sections 406(b)(1) 

and (2) of the Act. The Applicant, as a 

fiduciary, is dealing with the assets of 

the Plan in its own interest or its own 

account in violation of 406(b)(1) of the 

Act and is acting in a capacity where its 

interests are adverse to the interest of 

the plan or the interests of its 

participants and beneficiaries in 

violation of 406(b)(2) of the Act. 

Contribution Logistics 

13. The Applicant represents that it is 

committed to making the proposed 

Contribution as of September 15, 2011. 

The Applicant represents that it will 

also make a cash contribution to the 

Plan, by September 15, 2011, to allow 

the Plan to attain an AFTAP of 90%, 

along with the Contribution of the 

Securities. This additional cash 

contribution to the Plan is presently 

estimated at $58 million. The Applicant 

will know the actual cash contribution 

amount when it receives the 2011 

Actuarial Report from the Actuary. 

Furthermore, the Applicant represents 

that should the Plan sell the Securities 

prior to their maturity, Bayer will pay 

all costs or fees related to such sale. 

Rationale for the Contribution 

14. The Applicant represents that 

there are a number of reasons 

supporting the Contribution. In this 

regard, the Applicant states that the 

proposed Contribution is 

administratively feasible because it is a 

one time only transaction that would 

require no further action by the 

Department. Moreover, the Plan will 

pay no fees, commissions or costs in 

relation to the Contribution. 

The Applicant states that the 

Contribution is in the interests of the 

Plan, its participants and beneficiaries 

because the Contribution and an 

estimated $58 million additional cash 

contribution will allow the Plan to 

attain a 90% AFTAP. As noted above, 

the Plan’s required minimum 

contribution scheduled for September 

15, 2011 is $12,953,054. The Securities 

with a value of $300,000,000 at maturity 

on November 17, 2011, would exceed 

the Plan’s required minimum 

contribution by approximately $287 

million. An additional cash contribution 

of approximately $58 million should 

allow the Plan to attain an AFTAP of 

90%, when combined with the 

Securities. Accordingly, the Applicant 

states that the Contribution will avoid 

the benefit restrictions of section 206(g) 

of the Act and section 436(g) of the 

Code. 

The Applicant further states that the 

Contribution would be protective of the 

Plan and its participants and 

beneficiaries. In this respect, the 

Applicant explains that the 

Contribution involves Securities that are 

cash equivalents and have a readily 

ascertainable fair market value. 

Moreover, the Applicant indicates that 

the Securities will mature within 

months of the Contribution Date. 

Should the Plan need to sell the 

Securities prior to their maturity, the 

Applicant represents that it will cover 

all transaction costs that are associated 

with such sale. 

Summary 

15. In summary, the Applicant 

represents that the Contribution will 

satisfy the statutory requirements for an 

exemption under section 408(a) of the 

Act because: 

(a) In addition to the Securities, Bayer 

will contribute to the Plan, by 

September 15, 2011, such cash amounts 

as are needed to allow the Plan to attain 

an AFTAP of 90%, as determined by the 

Plan’s actuary; 

(b) The fair market value of the 

Securities will be determined by Bayer 

on the Contribution Date based on the 

average of the bid and ask prices as of 

3 p.m. Eastern Time, as quoted in The 

Wall Street Journal on the Contribution 

Date; 

(c) The Securities will represent less 

than 20% of the Plan’s assets. 

(d) The terms of the Contribution will 

be no less favorable to the Plan than 

those negotiated at arm’s length under 

similar circumstances between 

unrelated parties; 

(e) The Plan will pay no commissions, 

costs or fees with respect to the 

Contribution; and 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 76, No. 155 / Thursday, August 11, 2011 / Notices 49797 

(f) The Plan fiduciaries will review 

and approve the methodology used to 

value the Securities and ensure that 

such methodology is properly applied 

in determining the fair market value of 

the Securities. 

Notice to Interested Parties 

Notice of the proposed exemption 

will be given to interested persons 

within 5 days of the publication of the 

notice of proposed exemption in the 

Federal Register. The notice will be 

given to interested persons by first class 

mail or by return receipt requested 

electronic mail. Such notice will 

contain a copy of the notice of proposed 

exemption, as published in the Federal 

Register, and a supplemental statement, 

as required pursuant to 29 CFR 

2570.43(b)(2). The supplemental 

statement will inform interested persons 

of their right to comment on and/or to 

request a hearing with respect to the 

pending exemption. Written comments 

and hearing requests are due within 40 

days of the publication of the notice of 

proposed exemption in the Federal 

Register. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Anh-Viet Ly of the Department at (202) 

693–8648. (This is not a toll-free 

number.) 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under section 

408(a) of the Act and/or section 

4975(c)(2) of the Code does not relieve 

a fiduciary or other party in interest or 

disqualified person from certain other 

provisions of the Act and/or the Code, 

including any prohibited transaction 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of section 404 

of the Act, which, among other things, 

require a fiduciary to discharge his 

duties respecting the plan solely in the 

interest of the participants and 

beneficiaries of the plan and in a 

prudent fashion in accordance with 

section 404(a)(1)(b) of the Act; nor does 

it affect the requirement of section 

401(a) of the Code that the plan must 

operate for the exclusive benefit of the 

employees of the employer maintaining 

the plan and their beneficiaries; 

(2) Before an exemption may be 

granted under section 408(a) of the Act 

and/or section 4975(c)(2) of the Code, 

the Department must find that the 

exemption is administratively feasible, 

in the interests of the plan and of its 

participants and beneficiaries, and 

protective of the rights of participants 

and beneficiaries of the plan; 

(3) The proposed exemptions, if 

granted, will be supplemental to, and 

not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transitional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction; and 

(4) The proposed exemptions, if 

granted, will be subject to the express 

condition that the material facts and 

representations contained in each 

application are true and complete, and 

that each application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 2nd day of 

August, 2011. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2011–20341 Filed 8–10–11; 8:45 am] 

BILLING CODE 4510–29–P 

OFFICE OF NATIONAL DRUG 

CONTROL POLICY 

Designation of ONDCP SES 

Performance Review Board Members 

AGENCY: Office of National Drug Control 

Policy. 

ACTION: Notice of Designation of ONDCP 

SES Performance Review Board. 

Headings: Designation Pursuant of 

ONDCP SES Performance Review Board 

Pursuant to 5 CFR 4 30.310. 

SUMMARY: The Director of the Office of 

National Drug Control Policy has 

appointed Patrick M. Ward, Robert 

Denniston, Michele Marx, and Jeffrey 

Teitz as members of the ONDCP SES 

Performance Review Board (PRB). 

FOR FURTHER INFORMATION CONTACT: 

Please direct any questions to Briggitte 

LaFontant, Assistant for Personnel, 

Office of National Drug Control Policy, 

Executive Office of the President, 

Washington, DC 20502; (202) 395–6695. 

Daniel R. Petersen, 

Deputy General Counsel. 

[FR Doc. 2011–20422 Filed 8–10–11; 8:45 am] 

BILLING CODE 3180–W1–P 

NATIONAL SCIENCE FOUNDATION 

Notice of Permit Modification Issued 

Under the Antarctic Conservation Act 

of 1978 

AGENCY: National Science Foundation. 

ACTION: Notice of permit issued under 

the Antarctic Conservation of 1978, 

Public Law 95–541. 

SUMMARY: The National Science 

Foundation (NSF) is required to publish 

notice of permits issued under the 

Antarctic Conservation Act of 1978. 

This is the required notice. 

FOR FURTHER INFORMATION CONTACT: 

Nadene G. Kennedy, Permit Office, 

Office of Polar Programs, Rm. 755, 

National Science Foundation, 4201 

Wilson Boulevard, Arlington, VA 22230. 

SUPPLEMENTARY INFORMATION: On July 7, 

2011, the National Science Foundation 

published a notice in the Federal 

Register of a permit application 

received. The permit was issued on 

August 8, 2011 to: James G. Bockheim; 

Permit No. 2012–004. 

Nadene G. Kennedy, 

Permit Officer. 

[FR Doc. 2011–20409 Filed 8–10–11; 8:45 am] 

BILLING CODE 7555–01–P 

NATIONAL SCIENCE FOUNDATION 

Notice of Permit Modification Received 

Under the Antarctic Conservation Act 

of 1978 (Pub. L. 95–541) 

AGENCY: National Science Foundation. 

ACTION: Notice of Permit Modification 

Request Received under the Antarctic 

Conservation Act of 1978, Public Law 

95–541. 

SUMMARY: The National Science 

Foundation (NSF) is required to publish 

a notice of requests to modify permits 

issued to conduct activities regulated 

under the Antarctic Conservation Act of 

1978. NSF has published regulations 

under the Antarctic Conservation Act at 

Title 45 part 670 of the Code of Federal 

Regulations. This is the required notice 

of a requested permit modification. 

DATES: Interested parties are invited to 

submit written data, comments, or 

views with respect to this permit 

application by September 12, 2011. 

Permit applications may be inspected by 

interested parties at the Permit Office, 

address below. 

ADDRESS: Comments should be 

addressed to Permit Office, Room 755, 

Office of Polar Programs, National 

Science Foundation, 4201 Wilson 

Boulevard, Arlington, Virginia 22230. 

FOR FURTHER INFORMATION CONTACT: 

Nadene G. Kennedy at the above 

address or (703) 292–7405. 

SUPPLEMENTAL INFORMATION: The 

National Science Foundation, as 

directed by the Antarctic Conservation 

Act of 1978 (Pub. L. 95–541), as 


srobinson on DSK4SPTVN1PROD with NOTICES