39432 Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Application No. D–10539, et al.]

Proposed Exemptions; Pension Plan

for Employees of Southco, Inc. (the

Pension Plan); and Southco, Inc.

Employee Stock Ownership Plan (the

ESOP; Collectively, the Plans)

AGENCY: Pension and Welfare Benefits

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 (the Act) and/or the Internal

Revenue Code of 1986 (the Code).

Written Comments and Hearing

Requests

All interested persons are invited to

submit written comments or request 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. 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.

ADDRESSES: All written comments and

request for a hearing (at least three

copies) should be sent to the Pension

and Welfare Benefits Administration,

Office of Exemption Determinations,

Room N–5649, U.S. Department of

Labor, 200 Constitution Avenue, N.W.,

Washington, D.C. 20210. Attention:

Application No. lll, stated in each

Notice of Proposed Exemption. The

applications for exemption and the

comments received will be available for

public inspection in the Public

Documents Room of the Pension and

Welfare Benefits Administration, U.S.

Department of Labor, Room N–5638,

200 Constitution Avenue, N.W.,

Washington, D.C. 20210.

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).

SUPPLEMENTARY INFORMATION: 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.

Pension Plan for Employees of Southco,

Inc. (the Pension Plan); and Southco,

Inc. Employee Stock Ownership Plan

(the ESOP; collectively, the Plans)

Located in Concordville, Pennsylvania

Exemption Application Nos. D–10539 and D–

10540

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). If

the exemption is granted, the

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

and (b)(2), and 407(a) of the Act and the

sanctions resulting from the application

of section 4975 of the Code, by reason

of section 4975(c)(1)(A) through (E) of

the Code, shall not apply to (1) the

proposed purchase and holding by the

Pension Plan of common stock (the

Company Stock) issued by South

Chester Tube Company (the Company),

an affiliate of Southco Inc. (the

Employer), from the ESOP or the

Employer; and (2) the acquisition,

holding, and exercise of an irrevocable

put option (the Put Option) permitting

the Pension Plan to sell the Company

Stock back to the Employer for cash in

an amount that is the greater of either

(i) the fair market value of the Company

Stock at the time of the transaction (as

established by a qualified, independent

appraiser), or (ii) the Pension Plan’s

original acquisition cost for the

Company Stock.

This proposed exemption is subject to

the following conditions:

(a) Immediately after acquisition by

the Pension Plan, the aggregate fair

market value of the Company Stock

does not exceed 7.5% of the total assets

of the Pension Plan;

(b) A qualified, independent fiduciary

representing the Pension Plan expressly

approves each acquisition of the

Company Stock, based upon a

determination that such acquisition is in

the best interests of, and appropriate for,

the Pension Plan;

(c) The independent fiduciary

monitors the Pension Plan’s holding of

the Company Stock and takes whatever

action necessary to protect the Pension

Plan’s rights, including, but not limited

to, the exercising of the Put Option, if

appropriate;

(d) The Pension Plan pays a price that

is no greater than the fair market value

of the Company Stock at the time of the

transaction (as established by a

qualified, independent appraiser);

(e) In any sale of the Company Stock

by the ESOP to the Pension Plan, the

ESOP receives a price that is no less

than the fair market value of the

Company Stock at the time of the

transaction (as established by a

qualified, independent appraiser);

(f) The Pension Plan pays no

commissions nor other fees in

connection with the purchase or sale of

the Company Stock;

(g) Each purchase or sale of the

Company Stock by the Pension Plan is

a one-time transaction for cash;

(h) The Employer’s obligations under

the Put Option are secured by an escrow

account at an independent financial

institution and containing cash or U.S.

government securities worth at least 25

percent of the fair market value of the

Company Stock held by the Pension

Plan;

(i) The purchase of the Company

Stock by the Pension Plan is not part of

an arrangement to benefit the Employer

pursuant to the Employer’s obligation to

redeem shares of the Company Stock

from the participants of the ESOP; and

(j) All sales of the Company Stock by

the ESOP to the Employer meet the

requirements of section 408(e) of the Act

and the regulation thereunder (see 29

CFR § 2550.408(e)).

Summary of Facts and Representations

1. The Employer, a wholly owned

subsidiary of the Company, has its

Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices 39433

1 1 See Rev. Rul. 59–60, 1959–1 C.B. 237, as

modified by Rev. Rul. 65–193, 1965–2 C.B. 370, and

as modified and extended by Rev. Rul. 68–609,

1968–2 C.B. 327, and Rev. Rul 77–287, 1977–2 C.B.

319.

2The applicant represents that all sales of the

Company Stock by the ESOP to the Employer will

meet the requirements of section 408(e) of the Act

and the regulation thereunder (see 29 CFR

§ 2550.408(e)).

principal office and place of business in

Concordville, Pennsylvania. The

Employer is engaged in the business of

designing and manufacturing industrial

latches and access hardware. These

products are sold and distributed

nationally and internationally through

the Employer’s own sales organization,

as well as through a network of

authorized distributors.

2. The Pension Plan is a defined

benefit pension plan. As of December

31, 1998, the Pension Plan had 1324

participants. As of March 31, 1999, the

Pension Plan had total assets of

$110,877,665. No contributions to the

Pension Plan are currently due, nor

have any been made since 1985 because

of the full funding limitations of section

412 of the Code.

The ESOP, an employee stock

ownership plan, had, as of December 31,

1998, 1052 participants. As of that date,

the ESOP had total assets of

$55,192,942. No contributions to the

ESOP are currently due.

The trustee for both the Pension Plan

and the ESOP is PNC Bank, N.A.,

located in Philadelphia, Pennsylvania.

3. As of December 31, 1998, the

Company had a consolidated net worth

of $105,000,000. Equity interests in the

Company and its subsidiaries, including

the Employer, are not publicly traded.

As of October 11, 1999, approximately

29% of the Company Stock was held by

the ESOP; 56.9% was held by three

trusts (the Family Trusts) established by

the deceased founders of the Employer

for the benefit of their family members,

including children and grandchildren;

14.1% was held by various other

individuals.

Because the ESOP owns 29% and the

Family Trusts own 56.9% of the

outstanding Company Stock, more than

50% of the Company Stock is owned by

persons who are not ‘‘independent of

the issuer’’ (within the meaning of

section 407(f)(1)(B) of the Act). Thus,

the Company Stock is not a ‘‘qualifying

employer security’’ (as defined in

section 407(d)(5)(A) of the Act) with

respect to the Pension Plan.

Accordingly, absent an individual

exemption, the acquisition of the

Company Stock by the Pension Plan

would constitute a prohibited

transaction.

The Company Stock has been

appraised by Coopers & Lybrand L.L.P.

(Coopers), an independent public

accounting firm that performs annual

valuations of the Company Stock. In its

appraisal report, dated December 31,

1999, Coopers notes the recognition that

the Company has received as a quality

producer of industrial fasteners. In

arriving at a fair market value for the

Company Stock, Cooper states that it

gave consideration to the eight factors in

the valuation of the stock of closely-held

businesses that are set forth in the

Internal Revenue Service’s Revenue

Ruling 59–60.1 Coopers also utilized the

market approach and the income

approach to valuation and concluded

that a minority interest in the Company

Stock had a fair market value of $16,096

per share, as of December 31, 1999.

4. It is proposed that the Pension Plan

purchase shares of the Company Stock

from the ESOP, as the participants of the

ESOP elect to diversify their investment

under section 401(a)(2) of the Code, or

from the Employer, as shares of the

Company Stock are redeemed from

participants of the ESOP upon

distribution to them or otherwise

become available.2 Each purchase of the

Company Stock by the Pension Plan

will be a one-time transaction for cash.

The applicant represents that the

Company Stock represents an excellent

long-term investment opportunity for

the Pension Plan because the Pension

Plan will acquire an equity interest in a

strong, stable company. Purchase of the

Company Stock would also allow

further diversification of the Pension

Plan’s assets.

As a condition of this proposed

exemption, immediately after

acquisition by the Pension Plan, the

aggregate fair market value of the

Company Stock may not exceed 7.5% of

the total assets of the Pension Plan. The

applicant notes that the 7.5% limitation

is more stringent than the 10%

limitation of section 407(a)(2) of the Act

on the amount of ‘‘qualifying employer

securities’’ that may be acquired by a

defined benefit pension plan.

The Pension Plan would pay a price

that is no greater than the fair market

value of the Company Stock at the time

of the transaction, as established by a

qualified, independent appraiser.

Further, the Pension Plan would pay no

commissions nor other fees in

connection with the purchase of the

Company Stock. Finally, the Pension

Plan would have the protection of a Put

Option, which will enable it to sell the

Company Stock back to the Employer

for cash in an amount that is the greater

of either (i) the fair market value of the

Company Stock at the time of the

transaction (as established by a

qualified, independent appraiser), or (ii)

the Pension Plan’s original acquisition

cost for the Company Stock. The

Employer will bear the cost of all

appraisals necessary for purchases of

the Company Stock by the Pension Plan

pursuant to this proposed exemption, if

granted. The Employer will also secure

its obligations under the Put Option by

an escrow account at an independent

financial institution and containing cash

or U.S. government securities worth at

least 25 percent of the fair market value

of the Company Stock held by the

Pension Plan.

5. The Employer has retained

TrustCorp America (TrustCorp.) to serve

as the independent fiduciary for the

Pension Plan with respect to the

Pension Plan’s purchases of the

Company Stock. TrustCorp, an affiliate

of the regional brokerage firm Ferris

Baker Watts (Ferris), is located in

Washington, DC. In its letter dated

September 29, 1998, TrustCorp states it

directly administers 56 ERISA accounts,

representing a wide variety of plans,

with approximately $13.8 million in

assets. TrustCorp represents that it is

independent of the Employer and

derives less than one (1) percent of its

annual gross income from the Employer

and its affiliates. TrustCorp also

acknowledges its duties,

responsibilities, and liabilities in acting

as a fiduciary under the Act with

respect to the investment of any assets

of the Pension Plan in the Company

Stock or the sale of the Company Stock.

6. TrustCorp will expressly approve

in writing each acquisition of the

Company Stock, based upon a

determination that such acquisition is in

the best interests of, and appropriate for,

the Pension Plan. Each purchase of the

Company Stock made by the Pension

Plan will be consistent with the

investment guidelines, objectives, and

liquidity needs of the Pension Plan at

the time of the transaction. TrustCorp

will review all pertinent information,

including the most recent independent

appraisal of the Company Stock, the

current financial condition of the

Pension Plan, the terms of the purchase,

and the current financial condition of

the Company. TrustCorp will analyze

the valuation approach utilized by the

appraiser of the Company Stock and

determine, among other things, whether

the appraiser’s minority interest

discount for establishing the fair market

value of the Company Stock was

appropriate.

As the fiduciary responsible for any

assets of the Pension Plan invested in

the Company Stock, TrustCorp will

direct the exercise of all voting and

39434 Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices

3The Department expresses no opinion herein as

to whether the acquisition and holding of the

Property by the Plan violated any of the provisions

of Part 4 of Title I of the Act.

other ownership rights associated with

the Company Stock. TrustCorp will also

monitor the Pension Plan’s holding of

the Company Stock and take whatever

action necessary to protect the Pension

Plan’s rights, including, but not limited

to, the exercising of the Put Option, if

appropriate. If TrustCorp exercises the

Put Option, no more purchases of the

Company Stock will by made by the

Pension Plan pursuant to this proposed

exemption, if granted.

7. In summary, the applicant

represents that the proposed

transactions will satisfy the statutory

criteria for an exemption under section

408(a) of the Act and section 4975(c)(2)

of the Code because (a) Immediately

after acquisition by the Pension Plan,

the aggregate fair market value of the

Company Stock will not exceed 7.5% of

the total assets of the Pension Plan; (b)

TrustCorp, as the independent fiduciary

for the Pension Plan, will expressly

approve each acquisition of the

Company Stock, based upon a

determination that such acquisition is in

the best interests of, and appropriate for,

the Pension Plan; (c) TrustCorp will

monitor the Pension Plan’s holding of

the Company Stock and take whatever

action necessary to protect the Pension

Plan’s rights, including, but not limited

to, the exercising of the Put Option, if

appropriate; (d) the Pension Plan will

pay a price that is no greater than the

fair market value of the Company Stock

at the time of the transaction (as

established by a qualified, independent

appraiser); (e) the Pension Plan will pay

no commissions nor other fees in

connection with the purchase or sale of

the Company Stock; (f) each purchase or

sale of the Company Stock by the

Pension Plan will be a one-time

transaction for cash; and (g) the

Employer’s obligations under the Put

Option will be secured by an escrow

account at an independent financial

institution and containing cash or U.S.

government securities worth at least 25

percent of the fair market value of the

Company Stock held by the Pension

Plan.

For Further Information Contact: Ms.

Karin Weng of the Department,

telephone (202) 219–8881. (This is not

a toll-free number.)

Robert P. Yoo MD, PC Profit Sharing

Plan (the Plan) Located in Hyannis,

Massachusetts

[Applicant No. D–10842]

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). If

the exemption is granted, the

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

and (b)(2) of the Act and the sanctions

resulting from the application of section

4975 of the Code, by reason of section

4975(c)(1)(A) through (E) of the Code,

will not apply to the proposed sale (the

Sale) by the Plan of a parcel of

unimproved real property (the Property)

to Robert P. Yoo, M.D. (Dr. Yoo), a party

in interest with respect to the Plan,

provided that the following conditions

are satisfied:

(a) All terms and conditions of the

Sale are at least as favorable to the Plan

as those which the Plan could obtain in

an arm’s-length transaction with an

unrelated party;

(b) The Sales price is the greater of

$113,263 or the fair market value of the

Property as of the date of the Sale;

(c) The fair market value of the

Property has been determined by an

independent, qualified appraiser;

(d) The Sale is a one-time transaction

for cash; and

(e) The Plan does not pay any

commissions, costs or other expenses in

connection with the Sale.

Summary of Facts and Representations

1. Robert P. Yoo MD, PC (the

Employer) is the sponsor of the Plan. Dr.

Yoo is the sole owner and shareholder

of the Employer. The Employer is in the

business of plastic surgery. The

Employer was incorporated on October

1, 1979, in the State of Massachusetts

and is located in Hyannis,

Massachusetts.

The Plan is a defined contribution

profit sharing plan which was

established on October 1, 1979. As of

May 18, 2000, the Plan had four

participants, who are as follows: Dr.

Yoo, Marcia C. Fischer, Hilda S. Cohen,

and Catherine M. Damon. Dr. Yoo and

his wife, Jane E. Yoo, are the Trustees

of the Plan. As of November 8, 1999, the

Plan had total assets of $690,923.45.

2. In 1984, the Plan purchased the

Property from Robert W. Powers and

Rita S. Powers, unrelated third parties,

for a purchase price of $55,000.3 It is

represented that Dr. Yoo and Jane E.

Yoo, as Plan trustees, made the original

decision to purchase the Property as a

long term growth investment for the

Plan. The Property is a 5.5 acre parcel

of unimproved real property, located at

131 Ashley Drive, Centerville,

Massachusetts. The Property is adjacent

to property owned and resided on by Dr.

Yoo and his wife. The applicant

represents that the Property has not

been leased to, or used by, any party in

interest with respect to the Plan since

the date of acquisition by the Plan. The

value of the Property represents

approximately 14.9% of the Plan’s total

assets as of May 18, 2000. The applicant

represents that the only expenditure the

Plan has paid since owning the Property

was $16,500 in real estate taxes from

1984 (i.e., the year of original

acquisition) until May 18, 2000.

Therefore, the total cost to the Plan for

the Property was $71,500 as of May 18,

2000 ($16,500 + $55,000 = $71,500).

From the time of the purchase through

May 18, 2000, the Property has

remained vacant and no income has

been generated.

3. The Property was appraised (the

Appraisal) on September 27, 1999, by

Meredith A. McClane (Ms. McClane), a

Certified Residential Real Estate

Appraiser. Ms. McClane is independent

of the Employer and is an appraiser

with Davis Appraisals located in West

Hyannisport, Massachusetts.

Because of the lack of data on recent

sales of unimproved property in the area

in which the Property is located, Ms.

McClane determined the best use and

highest value of the Property was

associated with valuing the Property

consistent with the so-called

Development Procedure, where

undeveloped land is assumed to be

subdivided, developed and sold.

Development costs, incentive costs, and

carrying charges are subtracted from the

estimated proceeds of the sale, and the

net income projection is discounted

over the estimated period required for

market absorption of the developed sites

to derive an indication of value for the

land being appraised. Ms. McClane

determined that the fair market value of

the Property was $102,966 as of

September 27, 1999.

Additionally, the applicant will pay

to the Plan a premium of $10,297 as

recommended by Ms. McClane as a

result of the applicant’s ownership of

improved real property which is

adjacent to the Property. Ms. McClane

states that this upward adjustment,

commonly referred to as ‘‘assemblage’’

value, reflects the willingness of a

purchaser to pay above market value for

a parcel of property in order to preserve

such purchaser’s interest in their

present holdings of other parcels which

are adjacent to such property. Therefore,

based on the valuation procedure plus

the premium, the total proposed

purchase price for the Property was

Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices 39435

4For this purpose, the Department assumes that

the updated appraisal of the Property will take into

account any new data on recent sales of similar

property in the local real estate market which may

affect the valuation conclusion at that time.

5For purposes of this proposed exemption,

references to specific provisions of Title I of the

Act, unless otherwise specified, refer to the

corresponding provisions of the Code.

6 46 FR 7527, January 23, 1981.

7 48 FR 895, January 7, 1983.

8 47 FR 21331, May 18, 1982.

$113,263 as of May 18, 2000 ($102,966

+ $10,297 = $113,263).

4. The applicant represents that the

Property’s rate of appreciation appears

to have plateaued and believes that the

continued ownership of this relatively

illiquid asset is not in the best interest

of the Plan and its participants and

beneficiaries. The transaction will be a

one-time cash sale, and will enable the

Plan to diversify its investment

portfolio.

Furthermore, the applicant represents

that the proposed transaction is in the

best interest and protective of the Plan

because the Sale will be for an amount

equal to the greater of: (i) $113,263,

which represents the sum of the fair

market value of the Property as of

September 27, 1999 (i.e., $102,966) and

the premium based on the ‘‘assemblage’’

value (i.e., $10,297), as determined by

the Appraisal and Ms. McClane; or (ii)

the current fair market value of the

Property, as established by an

independent, qualified appraiser at the

time of the Sale. This amount exceeds

the original acquisition cost of the

Property, plus expenses and real estate

taxes incurred by the Plan from the date

of the acquisition until the date of the

proposed Sale (i.e., a total cost of

$71,5000 as of May 18, 2000). The Plan

will not pay any commissions, costs or

other expenses in connection with the

Sale. The applicant states that the

Appraisal will be updated at the time of

the transaction.4

5. In summary, the applicant

represents that the subject transaction

satisfies the statutory criteria contained

in section 408(a) of the Act and section

4975(c)(2) of the Code for the following

reasons:

(a) All terms and conditions of the

Sale will be at least as favorable to the

Plan as those which the Plan could

obtain in an arms-length transaction

with an unrelated party;

(b) The fair market value for Property

has been determined by an

independent, qualified appraiser;

(c) The Sale will be a one-time

transaction for cash;

(d) The Plan will not pay any

commissions, costs or other expenses in

connection with the Sale;

(e) The Plan will receive an amount

equal to the greater of:

(i) $113,263; or

(ii) the current fair market value of the

Property, as established by an

independent, qualified appraiser at the

time of the Sale.

Notice to Interested Persons: Notice of the

proposed exemption shall be given to all

interested persons in the manner agreed

upon by the applicant and Department

within 15 days of the date of publication in

the Federal Register. Comments and requests

for a hearing are due forty-five (45) days after

publication of the notice in the Federal

Register.

FOR FURTHER INFORMATION CONTACT:

Khalif Ford of the Department,

telephone (202) 219–8883 (this is not a

toll-free number).

Actuarial Sciences Associates, Inc.

(ASA) and ASA Fiduciary Counselors

Inc. (ASA Counselors) Located in

Alexandria, VA

[Exemption Application No: D–10879]

Proposed Exemption

The Department of Labor 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 29 C.F.R. Part 2570,

Subpart B (55 FR 32836, 32847, August

10, 1990).5

I. General Transactions

If the exemption is granted, the

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

through (D) and the sanctions resulting

from the application of section 4975 of

the Code by reason of section

4975(c)(1)(A) through (D), shall not

apply to a transaction between a party

in interest with respect to the Plumbers

and Pipe Fitters National Pension Fund

(the Fund) and an account (the Account)

that holds certain assets of the Fund

managed by ASA or ASA Counselors,

while serving as independent named

fiduciary (the Named Fiduciary) in

connection with Prohibited Transaction

Exemption 99–46 (PTE 99–46)(64 FR

61944, November 15, 1999); provided

that the following conditions are

satisfied:

(a) ASA or ASA Counselors, as

Named Fiduciary of the Account, is an

investment adviser registered under the

Investment Advisers Act of 1940 that

has, as of the last day of its most recent

fiscal year, total client assets under its

management and control in excess of

$50,000,000, and shareholders’ equity or

partners’ equity, as defined in Section

III(h), below, in excess of $750,000;

(b) At the time of the transaction, as

defined in Section III(i), below, the

party in interest or its affiliate, as

defined in Section III(a), below, does not

have, and during the immediately

preceding one (1) year has not

exercised, the authority to—

(1) appoint or terminate the Named

Fiduciary as a manager of the Account,

or

(2) negotiate the terms of the

management agreement with the Named

Fiduciary (including renewals or

modifications thereof) on behalf of the

Fund;

(c) The transaction is not described

in—

(1) Prohibited Transaction Class

Exemption 81–6 (PTCE 81–6) 6 (relating

to securities lending arrangements);

(2) Prohibited Transaction Class

Exemption 83–1 (PTCE 83–1) 7 (relating

to acquisitions by plans of interests in

mortgage pools), or

(3) Prohibited Transaction Class

Exemption 82–87 (PTCE 82–87) 8

(relating to certain mortgage financing

arrangements);

(d) The terms of the transaction are

negotiated on behalf of the Account

under the authority and general

direction of the Named Fiduciary, and

either the Named Fiduciary, or (so long

as the Named Fiduciary retains full

fiduciary responsibility with respect to

the transaction) a property manager

acting in accordance with written

guidelines established and administered

by the Named Fiduciary, makes the

decision on behalf of the Account to

enter into the transaction, provided that

the transaction is not part of an

agreement, arrangement, or

understanding designed to benefit a

party in interest;

(e) The party in interest dealing with

the Account is neither the Named

Fiduciary nor a person related to the

Named Fiduciary, as defined in Section

III(f), below;

(f) At the time the transaction is

entered into, and at the time of any

subsequent renewal or modification

thereof that requires the consent of the

Named Fiduciary, the terms of the

transaction are at least as favorable to

the Account as the terms generally

available in arm’s length transactions

between unrelated parties;

(g) Neither the Named Fiduciary nor

any affiliate thereof, as defined in

Section III(b), below, nor any owner,

direct or indirect, of a 5 percent (5%) or

more interest in the Named Fiduciary is

a person who, within the ten (10) years

immediately preceding the transaction,

has been either convicted or released

from imprisonment, whichever is later,

as a result of:

(1) Any felony involving abuse or

misuse of such person’s employee

39436 Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices

benefit plan position or employment, or

position or employment with a labor

organization;

(2) Any felony arising out of the

conduct of the business of a broker,

dealer, investment adviser, bank,

insurance company, or fiduciary;

(3) Income tax evasion;

(4) Any felony involving the larceny,

theft, robbery, extortion, forgery,

counterfeiting, fraudulent concealment,

embezzlement, fraudulent conversion,

or misappropriation of funds or

securities; conspiracy or attempt to

commit any such crimes or a crime in

which any of the foregoing crimes is an

element; or

(5) Any other crimes described in

section 411 of the Act.

For purposes of this Section I(g), a

person shall be deemed to have been

‘‘convicted’’ from the date of the

judgment of the trial court, regardless of

whether the judgment remains under

appeal.

II. Specific Exemption Involving Places

of Public Accommodation

If the exemption is granted, the

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

through (D) and 406(b)(1) and 406(b)(2)

of the Act and the sanctions resulting

from the application of section 4975 of

the Code, by reason of section

4975(c)(1)(A) through (E) of the Code,

shall not apply, effective November 8,

1999, to the furnishing of services,

facilities, and any goods incidental

thereto by a place of public

accommodation owned by the Account

managed by the Named Fiduciary to a

party in interest with respect to the

Fund, if the services, facilities, and

incidental goods are furnished on a

comparable basis to the general public.

III. Definitions

(a) For purposes of Section I(b), above,

of this proposed exemption, an

‘‘affiliate’’ of a person means—

(1) Any person directly or indirectly,

through one or more intermediaries,

controlling, controlled by, or under

common control with the person,

(2) Any corporation, partnership,

trust, or unincorporated enterprise of

which such person is an officer,

director, 5 percent (5%) or more partner,

or employee (but only if the employer

of such employee is the plan sponsor),

and

(3) Any director of the person or any

employee of the person who is a highly

compensated employee, as described in

section 4975(e)(2)(H) of the Code, or

who has direct or indirect authority,

responsibility, or control regarding the

custody, management, or disposition of

plan assets. A named fiduciary (within

the meaning of section 402(a)(2) of the

Act) of a plan, and an employer any of

whose employees are covered by the

plan will also be considered affiliates

with respect to each other for purposes

of Section I(b) if such employer or an

affiliate of such employer has the

authority, alone or shared with others,

to appoint or terminate the named

fiduciary or otherwise negotiate the

terms of the named fiduciary’s

employment agreement.

(b) For purposes of Section I(g), above,

of this proposed exemption, an

‘‘affiliate’’ of a person means—

(1) Any person directly or indirectly

through one or more intermediaries,

controlling, controlled by, or under

common control with the person,

(2) Any director of, relative of, or

partner in, any such person,

(3) Any corporation, partnership,

trust, or unincorporated enterprise of

which such person is an officer,

director, or a 5 percent (5%) or more

partner or owner, and

(4) Any employee or officer of the

person who—

(A) Is a highly compensated employee

(as described in section 4975(e)(2)(H) of

the Code) or officer (earning 10 percent

(10%) or more of the yearly wages of

such person) or

(B) Has direct or indirect authority,

responsibility or control regarding the

custody, management, or disposition of

Fund assets.

(c) The term ‘‘control’’ means the

power to exercise a controlling

influence over the management or

policies of a person other than an

individual.

(d) The term ‘‘goods’’ includes all

things which are movable or which are

fixtures used by the Account but does

not include securities, commodities,

commodities futures, money,

documents, instruments, accounts,

chattel paper, contract rights, and any

other property, tangible or intangible,

which, under the relevant facts and

circumstances, is held primarily for

investment.

(e) The term ‘‘party in interest’’ means

a person described in section 3(14) of

the Act and includes a ‘‘disqualified

person,’’ as defined in section 4975(e)(2)

of the Code.

(f) The Named Fiduciary is ‘‘related’’

to a party in interest for purposes of

Section I(e), above, of this proposed

exemption, if the party in interest (or a

person controlling, or controlled by, the

party in interest) owns a 5 percent (5%)

or more interest in the Named

Fiduciary, or if the Named Fiduciary (or

a person controlling, or controlled by,

the Named Fiduciary) owns a 5 percent

(5%) or more interest in the party in

interest. For purposes of this definition:

(1) The term ‘‘interest’’ means with

respect to ownership of an entity—

(A) The combined voting power of all

classes of stock entitled to vote or the

total value of the shares of all classes of

stock of the entity if the entity is a

corporation,

(B) The capital interest or the profits

interest of the entity if the entity is a

partnership; or

(C) The beneficial interest of the

entity if the entity is a trust or

unincorporated enterprise; and

(2) A person is considered to own an

interest held in any capacity if the

person has or shares the authority—

(A) To exercise any voting rights, or

to direct some other person to exercise

the voting rights relating to such

interest, or

(B) To dispose or to direct the

disposition of such interest.

(g) The term ‘‘relative’’ means a

relative as that term is defined in

section 3(15) of the Act, or a brother,

sister, or a spouse of a brother or sister.

(h) For purposes of Section I(a) of this

proposed exemption, the term

‘‘shareholders’’ equity’’ or ‘‘partners’’

equity’’ means the equity shown in the

most recent balance sheet prepared

within the two (2) years immediately

preceding a transaction undertaken

pursuant to this proposed exemption, in

accordance with generally accepted

accounting principles.

(i) The ‘‘time’’ as of which any

transaction occurs is the date upon

which the transaction is entered into. In

addition, in the case of a transaction

that is continuing, the transaction shall

be deemed to occur until it is

terminated. If any transaction is entered

into on or after the effective date of this

exemption, if granted, or a renewal that

requires the consent of the Named

Fiduciary occurs on or after such

effective date, and the requirements of

this proposed exemption are satisfied at

the time the transaction is entered into

or renewed, respectively, the

requirements will continue to be

satisfied thereafter with respect to the

transaction. Nothing in this subsection

shall be construed as exempting a

transaction which becomes a transaction

described in section 406 of the Act or

section 4975 of the Code while the

transaction is continuing, unless the

conditions of this proposed exemption

were met either at the time the

transaction was entered into or at the

time the transaction would have become

prohibited but for this proposed

exemption.

Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices 39437

9The applicants represent that ASA was a

registered investment adviser throughout the period

it acted as Named Fiduciary, pursuant to PTE 96–

46, from November 8, 1999, through December 20,

1999.

Temporary Nature of Exemption

The Department has determined that

the relief provided to ASA and ASA

Counselors by this proposed exemption

will be temporary in nature. The

exemption, if granted, will be effective,

November 8, 1999, through December

20, 1999, for ASA and from December

20, 1999, and thereafter for ASA

Counselors. The exemption, if granted,

will expire on the day which is five (5)

years from November 8, 1999.

Accordingly, the relief provided by this

proposed exemption will not be

available upon expiration of such fiveyear period for any new or additional

transactions described herein after such

date. Should ASA or ASA Counselors

wish to extend, beyond the five-year

period, the relief provided by this

proposed exemption, they may submit

another application for exemption.

Preamble

In October 1997, the Department

received an exemption application (D–

10514) from the Fund requesting relief

from the prohibited transaction

provisions of section 406(a) and (b) of

the Act. The Department published a

notice of proposed exemption (the

Notice) in the Federal Register on May

29, 1998, at 63 FR 29453. The final

exemption, Prohibited Transaction

Exemption 99–46 (PTE 99–46), was

published in the Federal Register on

November 15, 1999, at 64 FR 61944.

PTE 99–46 provides an exemption,

effective October 9, 1997, from the

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

406(a)(1)(B), 406(a)(1)(D), 406(b)(1), and

406(b)(2) of the Act, and the sanctions

resulting from the application of section

4975 of the Code, by reason of section

4975(c)(1)(A) through (E) of the Code,

for the transfer to the Fund from the

United Association of Journeymen and

Apprentices of the Plumbing and Pipe

Fitting Industry of the United States and

Canada, AFL–CIO (the Union), a party

in interest with respect to the Fund, of

the Union’s limited partnership

interests in the Diplomat Properties,

Limited Partnership (the Partnership),

the sole asset of which is the Diplomat

Resort and Country Club (the Property),

and the transfer to the Fund of the

Union’s stock in Diplomat Properties,

Inc., the corporate general partner of the

Partnership; provided certain conditions

are satisfied. In response to issues raised

by the commentators after the

publication of the Notice, the applicants

agreed to a number of additional

requirements, including the retention by

the Fund of an independent Named

Fiduciary to oversee the Fund’s

investment in the Partnership. In

connection with PTE 99–46, ASA was

appointed, effective November 8, 1999,

by the trustees of the Fund (the

Trustees) to serve as the Named

Fiduciary of the Account which holds

the Fund’s interest in the Partnership.

Summary of Facts and Representations

1. The Fund is a Taft-Hartley multiemployer defined benefit pension fund.

The Fund has approximately 123,349

participants and beneficiaries, as of

March 2, 2000. As of November 30,

1999, the Fund had approximately $4.3

billion in assets. The assets of the Fund

include the interests in the Partnership

and in the corporate general partner of

the Partnership which the Fund

acquired pursuant to PTE 99–46. The

sole asset of the Partnership consists of

the Property located in Hollywood and

Hallandale, Florida. The Property

consists of several parcels, including an

oceanfront hotel complex, a motel, a

vacant parcel of oceanfront real estate

approved for development as

condominiums, a golf course, a country

club, and a marina (collectively, the

Project).

The Fund currently owns 100 percent

(100%) of the equity interests in the

Partnership. Such interests in the

Partnership are not publicly offered

securities. Pursuant to regulations

issued by the Department, 29 CFR

§ 2510.3–101 (the Plan Assets

Regulation), when a plan acquires an

equity interest in an entity, which

interest is not a publicly offered security

or a security issued by an investment

company registered under the

Investment Company Act of 1940, the

underlying assets of the entity will be

deemed to include plan assets, unless

certain exceptions apply. However,

when 100 percent (100%) of the

outstanding equity interests in such

entity are owned by a plan or a related

group of plans, such exceptions do not

apply (see 29 CFR § 2510.3–101(h)(3) of

the Plan Asset Regulation). Accordingly,

in the situation described herein the

applicants represent that the Property,

which is the sole asset of the

Partnership, would be deemed to be an

asset of the Fund; and any transaction

involving the Property is treated as a

transaction involving Fund assets for

purposes of the Act.

2. The request for relief from the

prohibited transaction provisions of the

Act was filed on behalf of ASA and ASA

Counselors. ASA is a Delaware

corporation which provides a broad

range of benefit consulting services.

ASA became a registered investment

adviser under the Investment Advisers

Act of 1940, as amended, (the Advisers

Act) on November 19, 1998, and ceased

to be a registered investment adviser on

January 29, 2000.9 ASA Counselors, a

wholly owned subsidiary of ASA, was

established to provide investment

advisory services. ASA Counselors

became a registered investment adviser

under the Advisers Act, effective

November 29, 1999. It is represented

that ASA Counselors has a net worth in

excess of $750,000. Ellen A. Hennessy,

Esq. serves as President and CEO of

ASA Counselors and is a Senior Vice

President of ASA.

In connection with PTE 99–46, ASA

was appointed, effective November 8,

1999, by the Trustees to serve as the

Named Fiduciary of the Account, which

holds the Fund’s interest in the

Partnership and the Property which is

the sole asset of the Partnership. In this

regard, it is represented that the

Trustees chose ASA from a list of

potential independent fiduciaries that

were acceptable to the Department. The

terms of the appointment of ASA are set

forth in the Independent Named

Fiduciary Agreement (the Agreement)

between the Fund and ASA. It is

represented that in the course of

granting PTE 99–46, the terms and

conditions under which ASA was to be

engaged as the Named Fiduciary of the

Account were reviewed by the

Department of Labor. It is represented

that those terms and conditions

permitted the assignment of the

Agreement to an affiliate of ASA,

provided that such affiliate met certain

conditions.

Subsequently, it is represented that

when ASA Counselors became a

registered investment adviser, and

began performing the investment

advisory services previously performed

by ASA, ASA assigned its

responsibilities under the Agreement to

ASA Counselors with the consent of the

Trustees of the Fund and the

Department, in accordance with the

terms of the Agreement. For this reason,

ASA and ASA Counselors have

requested that the proposed exemption

be applicable to both ASA and ASA

Counselors.

Furthermore, the applicants have

requested retroactive relief for

transactions described herein, effective

as of November 8, 1999, the date of

ASA’s appointment, to cover the entire

period that either ASA or ASA

Counselors has acted as the Named

Fiduciary. Specifically, it is represented

that ASA served as Named Fiduciary

with respect to the Account from

39438 Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices

10 49 FR 9494 (March 13, 1984), as corrected, 50

FR 41430 (October 10, 1985).

11The applicants represent that CSC meets the

definition of a QPAM, as set forth in Part V(a) of

PTCE 84–14, and that PTCE 84–14 is available to

provide relief from the prohibited transaction

provisions of the Act for transactions between

parties in interest with respect to Fund and the

Project while under the management of CSC. The

Department is offering no view, herein, as to

whether CSC has satisfied all of the conditions, as

set forth in PTCE 84–14, nor is the Department,

herein, providing CSC any relief with respect to

such transactions.

12 It is represented that ASA and ASA Counselors

are not requesting an exemption for the type of

transactions which are described in Part II and Part

III of PTCE 84–14, and would be covered by that

exemption if the conditions stated therein were

met.

November 8, 1999, until December 20,

1999, and that ASA Counselors has

served and will serve as Named

Fiduciary thereafter. While it is

represented that neither ASA nor ASA

Counselors is aware of any transaction

that would have been a prohibited

transaction in the absence of the

requested exemption, the size of the

Fund and the scope of the Project would

cause extreme administrative

difficulties in attempting to identify

whether any inadvertent party in

interest transactions have occurred

since November 8, 1999.

3. ASA and ASA Counselors have

requested a general exemption, rather

than an exemption involving a specific

transaction with a particular party in

interest. Due to the size and complexity

of the Fund, the identities of the parties

in interest which may be involved in the

subject transactions were not known at

the time the application was filed.

Because the Property is a complex real

estate development, involving a variety

of commercial spaces and public

accommodation, relief from the

prohibited transaction provisions of the

Act has been requested for transactions

with parties in interest that are expected

to occur in the ordinary course of the

operation of the Property.

4. The requested exemption would

permit ASA, effective from November 8,

1999, until December 20, 1999, and

thereafter ASA Counselors, while

serving as the Named Fiduciary of the

Account, to engage on behalf of the

Account in certain transactions with

parties in interest with respect to the

Fund, without violating section

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

Further, in the case of transactions

involving places of public

accommodation, the requested

exemption would permit, effective

November 8, 1999, the furnishing of

services, facilities, and any goods

incidental thereto by a place of public

accommodation owned by the Account

that is managed by the Named

Fiduciary, to a party in interest with

respect to the Fund, if the services,

facilities, and incidental goods are

furnished on a comparable basis to the

general public.

With respect to the furnishing of

services, facilities, and any goods

incidental thereto by places of public

accommodation owned by the Account,

the applicants maintain that, absent this

exemption, it would not be feasible to

monitor routine transactions in the

operation of the hotel complex, the golf

course, and the other components of the

Property. In this regard, given the large

number of participants and beneficiaries

of the Fund, as well as the large number

of contributing employers and service

providers to the Fund, and their

affiliates, it is not possible to prevent

party in interest transactions from

occurring. Accordingly, if granted, this

exemption will permit the furnishing of

services, facilities, and any goods

incidental thereto by places of public

accommodation owned by the Account,

and managed by ASA or ASA

Counselors, to parties in interest with

respect to the Fund, if such services,

facilities and incidental goods are

furnished on a comparable basis to the

general public.

With respect to transactions with

parties in interest, other than those

involving places of public

accommodation, the requested

exemption, if granted, would provide

relief to ASA or ASA Counselors, while

serving as Named Fiduciary of the

Account, which is similar to the relief

provided to qualified professional asset

managers (QPAMs or a QPAM) under

Prohibited Transaction Class Exemption

84–14 (PTCE 84–14).10 In general, PTCE

84–14 permits various parties in interest

with respect to an employee benefit

plan to engage, under certain

conditions, in transactions involving

plan assets, if the assets are managed by

persons defined under the exemption as

QPAMs. The applicants have

represented that the Fund currently has

engaged CS Capital Management Inc.

(CSC), to manage the Project.11 In this

regard, ASA Counselors has the

authority to retain or remove CSC.

Under the terms of the Agreement, ASA

and, pursuant to the assignment, ASA

Counselors have agreed to indemnify

the Fund for any losses or damages

incurred by the Fund as a result of a

breach of fiduciary duty by any QPAM

retained to manage the Project.

Specifically, ASA and ASA

Counselors have requested relief under

conditions which are similar to those

required in Part I of PTCE 84–14.12 In

this regard, Part I of PTCE 84–14

provides relief from the restrictions of

section 406(a)(1)(A)–(D) of the Act and

4975(c)(1)(A)–(D) of the Code for

transactions between a party in interest

with respect to an employee benefit

plan and an investment fund in which

such plan has an interest which is

managed by a QPAM; provided certain

conditions are met. One such condition

(the Diverse Clientele Test), as set forth

in Part I(e) of PTCE 84–14, requires that:

The transaction is not entered into with a

party in interest with respect to any plan

whose assets managed by the QPAM, when

combined with the assets of other plans

established or maintained by the same

employer (or affiliate thereof * * * ) or by

the same employee organization, and

managed by the QPAM, represent more than

20 percent of the total client assets managed

by the QPAM at the time of the transaction.

In this regard, it is represented that due

to the nature and scope of the

responsibilities of the Named Fiduciary,

the assets of the Fund held by the

Account managed by ASA or ASA

Counselors exceed 20 percent (20%) of

the total assets that those entities have

under management. The applicants

represent that they are unable to satisfy

the Diverse Clientele Test found in Part

I(e) of PTCE 84–14 and accordingly,

request the relief which would be

provided by this proposed exemption.

5. Notwithstanding their inability to

satisfy the Diverse Clientele Test, the

applicants maintain that the requested

administrative exemption should be

granted where it can be demonstrated

that the applicants, like a QPAM, act in

the best interest of plan participants,

unencumbered by a relationship with

parties in interest. With regard to

independence, it is represented that

neither ASA nor ASA Counselors had

any relationship with the Fund or with

the Trustees, prior to the execution of

the Agreement and the appointment of

ASA as Named Fiduciary. In the

opinion of the applicants, the

Department’s involvement in the

appointment process ensured that when

selected to serve as the Named

Fiduciary of the Account, ASA was

independent and qualified to act in that

capacity. Furthermore, restrictions on

the removal (or assignment) of the

Named Fiduciary by the Trustees

without either the consent of the

Department or a court order obtained for

cause, in the opinion of the applicants,

provide sufficient protection to ensure

the continued independence of ASA

and ASA Counselors. Furthermore, it is

represented that the annual fee paid by

the Fund represents less than one-fourth

(1⁄4) of one percent (1%) of the more

than $100 million in total annual

Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices 39439

revenues received by ASA and its

subsidiaries in 1998 and 1999.

6. In the opinion of the applicants, the

proposed exemption is in the best

interest of the Fund. In this regard, if

granted, the proposed exemption would

facilitate the management of the

Property in the manner most efficient

and beneficial to the participants and

beneficiaries that have interests in the

Fund. As discussed above, the proposed

exemption would facilitate routine

operations of the Property. In the

absence of the exemption, it would be

burdensome to examine each

transaction to determine whether such

transaction might involve a party in

interest. Furthermore, without the

exemption, the Account could be

prevented from entering into beneficial

financial transactions with parties in

interest that would enhance the return

to the Fund.

7. The applicants maintain that in

granting PTCE 84–14, the Department

has already determined that the type of

exemption requested by ASA and ASA

Counselors is administratively feasible.

Accordingly, in the opinion of the

applicants, the requested exemption

would not impose any administrative

burdens on the Department which are

not already imposed by PTCE 84–14.

8. It is represented that the conditions

of the proposed exemption provide

adequate safeguards for the protection of

the rights of participants and

beneficiaries of the Fund, in that ASA

and ASA Counselors satisfy the

requirements set forth in the definition

of a QPAM, pursuant Part V(a) of PTCE

84–14. In this regard, with respect to the

capitalization requirement, ASA and

ASA Counselors represent that they

each have shareholder’s equity of more

than $750,000. Further, in connection

with the transfer of its responsibilities to

ASA Counselors, ASA has agreed that it

will cause ASA Counselors to maintain

shareholders’ equity of at least $750,000

while the Agreement is in effect.

Furthermore, as of the last day of the

most recent fiscal year, the total client

assets under the management and

control of ASA or ASA Counselors

exceeds $50,000,000, as required for a

QPAM under Part V(a)(4) of PTCE 84–

14. In this regard, the total assets under

the management and control of ASA,

during the period from November 8,

1999, through December 20, 1999, and

under the management and control of

ASA Counselors thereafter, have

exceeded $50,000,000 largely due to the

assets in the Account which either ASA

or ASA Counselors have managed while

serving as the Named Fiduciary in

connection with PTE 99–46.

9. The applicants maintain that the

proposed exemption would be

protective of the rights of participants

and beneficiaries of the Fund because of

the on-going oversight of both the

Trustees and the Department. In this

regard, it is represented that under the

terms of the Agreement, ASA

Counselors periodically reports to both

the Trustees and the Department. In the

absence of the proposed exemption,

ASA and ASA Counselors may be

unable to exercise the degree of control

over the financing and operations of the

Project, as contemplated by the

Department. The Fund has more than $4

billion in assets and has party in interest

relationships with a variety of financial

institutions and other service providers.

In the opinion of the applicants, without

the requested exemption, the pool of

possible lenders and equity investors

would be unduly restricted, because any

financial institution that has preexisting relations with the Fund would

be excluded from dealing with the

Account.

10. The proposed exemption contains

conditions which are designed to ensure

the presence of adequate safeguards to

protect the interests of the Fund

regarding the subject transactions.

Except for the Diverse Clientele Test, as

set forth in Part I(e) of PTCE 84–14, the

proposed exemption contains

conditions substantially similar to those

which are set forth in Part I of PTCE 84–

14. In this regard, the transactions

which are the subject of this proposed

exemption cannot be part of an

agreement, arrangement, or

understanding designed to benefit a

party in interest. Furthermore, neither

the Named Fiduciary nor a person

related to the Named Fiduciary may

engage in transactions with the

Account.

11. In summary, the applicants (i.e.,

ASA and ASA Counselors) represent

that the transactions satisfy the statutory

criteria for an exemption under section

408(a) of the Act and section 4975(c)(2)

of the Code because, among other

things:

(a) The Named Fiduciary for the

Account is an investment adviser

registered under the Advisers Act with

assets in excess of $50,000,000 under its

management and control, and

shareholders’ equity in excess of

$750,000;

(b) At the time of the transaction, the

party in interest or its affiliate does not

have, and during the preceding one (1)

year has not exercised, the authority to

appoint or terminate the Named

Fiduciary, as a manager of the Fund’s

assets in the Account, or to negotiate the

terms on behalf of the Fund (including

renewals or modifications) of the

management agreement;

(c) The subject transactions are not

those which are described in PTCE 81–

6; PTCE 83–1; or PTCE 82–87;

(d) The terms of the transactions were

negotiated on behalf of the Account by,

or under the authority and general

direction of ASA until December 20,

1999, and thereafter have been and will

continue to be negotiated by ASA

Counselors; and either ASA or ASA

Counselors (or a property manager

acting in accordance with written

guidelines established and administered

by ASA until December 20, 1999, and

thereafter by ASA Counselors) has made

or will make the decision on behalf of

the Account to enter into each

transaction;

(e) The transactions are not part of an

agreement, arrangement, or

understanding designed to benefit a

party in interest;

(f) At the time each transaction is

entered into, renewed, or modified, the

terms of the transaction are at least as

favorable to the Account as the terms

generally available in arm’s length

transactions between unrelated parties;

(g) Neither ASA nor ASA Counselors,

nor any affiliate thereof, nor any owner,

direct or indirect, of a 5 percent (5%) or

more interest in ASA or ASA

Counselors, is a person who, within the

ten (10) years immediately preceding

the transaction has been either

convicted or released from

imprisonment, whichever is later, as a

result of any felony, as set forth in

Section I(g) of this proposed exemption;

(h) Neither ASA nor ASA Counselors,

nor a person related thereto, engages in

the transactions with the Account

which are the subject of this proposed

exemption; and

(i) Services, facilities, and any goods

incidental thereto, provided by a place

of public accommodation which is

owned by the Account managed by the

Named Fiduciary will be furnished to

any party in interest on a basis which

is comparable to the furnishing of such

services, facilities and incidental goods

to the general public.

Notice to Interested Persons

ASA will furnish a copy of the Notice

of Proposed Exemption (the Notice)

along with the supplemental statement

(the Supplemental Statement), as

described at 29 CFR § 2570.43(b)(2), to

the Trustees of the Fund and to

interested persons who commented in

writing to the Department in connection

with PTE 99–46, to inform such persons

of the pendency of this exemption. In

this regard, the Trustees of the Fund

include the President, Secretary, and

39440 Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices

Treasurer of the Fund, who are the three

most senior officials of the Union whose

members are participants in the Fund.

Given the technical nature of the

proposed exemption and the fact that

participants of the Fund were

individually notified in connection with

the Department’s consideration of PTE

99–46, the applicants believe that it

should be sufficient to meet the

Department’s notification requirements

if Union officials receive a copy of the

Notice and the Supplemental Statement

on behalf of the Union membership and

that individual notification be provided

only to those participants in the Fund

who have shown an interest in the

investment made in the Property to

which the proposed exemption relates.

A copy of the Notice, as it appears in the

Federal Register, and a copy of the

Supplemental Statement, will be

provided, by first class mailing, within

fifteen (15) days of the publication of

the Notice in the Federal Register.

Comments and requests for a hearing are

due on or before 45 days from the date

of publication of the Notice in the

Federal Register.

For Further Information Contact: Ms.

Angelena C. Le Blanc of the Department,

telephone (202) 219–8883 (this is not a

toll-free number).

United Food and Commercial Workers

Union Local 789 and St. Paul Food

Employers Health Care Plan (the Plan)

Located in Bloomington, Minnesota

[Application No. L–10872]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

and in accordance with the procedures

set forth in 29 CFR Part 2570, Subpart

B (55 FR 32836, 32847, August 10,

1990). If the exemption is granted, the

restrictions of section 406(a) of the Act

shall not apply to the proposed

purchase of prescription drugs, at

discount prices, by Plan participants

and beneficiaries, from Rainbow

Pharmacies and Rainbow Foods Group,

Inc. (RFG)(collectively, referred to as

Rainbow), parties in interest with

respect to the Plan, provided the

following conditions are satisfied: (a)

The terms of the transaction are at least

as favorable to the Plan as those the Plan

could obtain in a similar transaction

with an unrelated party; (b) any

decision by the Plan to enter into

agreements governing the subject

purchases will be made by Plan

fiduciaries independent of Rainbow; (c)

at least 50% of the preferred providers

participating in the Preferred Pharmacy

Network (PPN) which will be selling

prescription drugs to the Plan’s

participants and beneficiaries will be

unrelated to Rainbow; (d) Rainbow will

provide prescription drugs to eligible

persons under the identical conditions

and for the identical amounts as under

the Snyder Drug Stores, Inc. (Snyder)

and SuperValue Pharmacies, Inc. (SPI)

Agreements; and (e) the transaction is

not part of an agreement, arrangement or

understanding designed to benefit a

party in interest.

Summary of Facts and Representations

1. The Plan is a multi-employer

employee welfare benefit plan which

has been in existence since 1966. The

Plan was established to provide health

and welfare benefits including life,

sickness, accident and other benefits for

participants and their beneficiaries. The

Plan is directed by a ten person joint

board of trustees comprised of five

individuals selected to represent the

United Food and Commercial Workers

Union Local 789 and five individuals

selected to represent the retail food

employers. The Plan currently has

approximately 5,922 participants and

beneficiaries, and $11,500,000 in total

assets.

2. RFG is a large retail grocer in

Minnesota, incorporated in Nevada. In

1999, RFG began operating pharmacies

in some of its grocery stores under the

name Rainbow Pharmacies. Rainbow

Pharmacies is part of RFG. RFG has filed

a ‘‘doing business as’’ for the name

Rainbow Pharmacies. The applicant

represents that Rainbow is a party in

interest to the Plan because they make

contributions to the Plan on behalf of

their employees that are participants in

the Plan.

3. Under the Plan, participants have

two alternative ways to receive the

prescription drug benefit. One, a

participant may have a prescription

filled at an out-of-network pharmacy,

pay the pharmacy’s charge for the

prescription at the time of dispensing,

and submit a reimbursement claim to

the Plan Administrator. The Plan would

then reimburse the participant in full for

the pharmacy’s charge for the

prescription, less the $5.00 participant

co-payment. Two, a participant may

have a prescription filled at a pharmacy

within a preferred network, and pay

only the $5.00 co-payment. The

pharmacy then submits the claim for the

remaining agreed-upon cost for the

prescription directly to the Plan

Administrator.

4. Effective January 1, 1994, the

trustees of the Plan implemented the

Plan’s first prescription drug PPN in

order to manage prescription drug price

and utilization, manage related costs,

provide ready participant access to

courteous and reliable pharmacy

services and professional advice, and to

minimize or eliminate eligibility

policing problems. The first Preferred

Provider Agreement (the Agreement),

the result of arm’s-length negotiations,

is between the Plan and Snyder. Snyder

is not a party in interest with respect to

the Plan.

5. Under the Agreement, Snyder

agrees to provide prescription drugs to

the Plan participants and their

beneficiaries consistent with the Plan

document and the Agreement at a

specified reduced cost in exchange for

the potential to realize an expanded

customer base due to its status as a

preferred pharmacy with respect to the

Plan. The material elements of the

Agreement are as follows:

(1) Snyder agrees to dispense covered

prescription drugs, using generic drugs

when available, within prescribed

dosage units for one dispensing fee;

(2) The agreed upon dispensing fee is:

(a) The lesser of:

(i) The Usual and Customary charge

for such prescription drug, or

(ii) The sum of the Drug Acquisition

Cost plus the Professional Dispensing

Fee.

The Drug Acquisition Cost for each

prescription drug provided by the

Pharmacy to an Eligible Person shall be

defined to be the lesser of the following

amounts:

(a) 90% of the average wholesale price

(AWP) for such prescription drug; or

(b) The lowest stated maximum

allowable cost (MAC) for such

prescription drug on the most recently

published pharmaceutical industry

maximum allowable cost list, however,

in no event will the MAC price exceed

the Federal Upper Limits (as published

by the Federal Government under the

Federal Medical Entitlement Program).

The Professional Dispensing Fee shall

equal $2.45 for each dispensing of a

prescription drug in accordance with

the Plan and the Agreement.

(3) Neither the Plan nor the

participant is liable for the cost of any

prescription drug dispensed contrary to

the Agreement;

(4) Snyder will provide eligibility

identification cards, maintain a current

computerized eligibility list, and verify

eligibility prior to dispensation;

(5) The Plan receives 67 1⁄2 percent of

formulary rebates received by Snyder

based on the dispensing of each

manufacturer’s formulary drugs under

the Plan and the Agreement. The Plan

also receives quarterly formulary reports

of formulary drugs dispensed and

rebates received;

Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices 39441

(6) The Plan has the right to inspect

Snyder’s records to audit claims and

formulary rebates;

(7) Snyder must provide monthly

prescription drug utilization reports;

and

(8) The Plan has the right to terminate

the Agreement upon a maximum of 60

days written notice.

6. The Plan’s trustees have also

negotiated an identical Agreement with

SPI, a large retail grocer in Minnesota.

It expanded the PPN by including the

pharmacies located in Cub Foods (Cub)

stores, a wholly owned subsidiary of

SPI. The terms of the SPI Agreement are

identical to those of the Snyder

Agreement. The fees are determined by

a combination of amounts objectively

established by reference to industry

resources and beyond the control or

manipulation of SPI.

SPI and Cub are parties in interest

with respect to the Plan because they

make contributions to the Plan on behalf

of their employees that are participants

in the Plan. Accordingly, the applicant

received an exemption, Prohibited

Transaction Exemption (PTE) 95–61, 80

FR 37,689 (July 21, 1995).

Pursuant to PTE 95–61, the Plan

entered into the Agreement with SPI to

maximize the benefits that can be

provided to participants and their

beneficiaries. The reduction in costs

paid by the Plan for prescription drugs

enabled the Plan to maintain its current

level of benefits to the participants and

their beneficiaries. Expanding the PPN

to include SPI, thereby increasing the

utilization of the PPN, enabled the Plan

to obtain additional discounts on

prescriptions currently dispensed outof-network. The Plan receives even

greater savings due to the negotiated

fees rather than the usual and customary

billing of out-of-network pharmacies.

Specifically, the applicant represents

that since its agreement with Snyder in

1994, the Plan has saved $53,188 for

ingredient costs alone. The savings over

the usual and customary billing of outof-network pharmacies was estimated to

be $90,000. Further, prescriptions

dispensed by Snyder resulted in

additional savings of $10,000. In

reference to the SPI Agreement, during

1996, the applicant represents savings

amounted to approximately $28,800 for

ingredients alone. The savings over the

usual and customary billing of out-ofnetwork pharmacies is estimated to be

approximately $36,000.

7. The applicant represents that the

Plan wishes to enter into a preferred

pharmacy agreement with Rainbow

which is similar to the Agreements

entered into between the Plan and

Synder and SPI. The applicant

represents that the financial terms of all

three Agreements are identical and will

not deviate in the future from the terms

of the Snyder Agreement, including any

amendments which may be made in the

future to the Snyder Agreement.

The applicant further represents that

pursuant to the Rainbow Agreement,

Rainbow will provide prescription

drugs to eligible persons under the

identical conditions and for the

identical amounts as under the Snyder

and SPI Agreements.

The applicant notes that the only

remuneration that will be paid to

Rainbow by the Plan will be the fees as

determined under the Agreement.

Further, the fees are determined by the

combination of amounts objectively

established by reference to industry

resources and beyond the control and/

or manipulation of Rainbow.

8. The Plan seeks to maximize the

benefits that can be provided to

participants and their beneficiaries.

Reducing the cost paid by the Plan for

prescription drugs will enable the Plan

to maintain its current level of benefits

to the participants and their

beneficiaries. Expanding the PPN to

include Rainbow, thereby increasing the

utilization of the PPN, will enable the

Plan to obtain additional discounts on

prescriptions currently dispensed outof-network. The Plan will be able to

receive even greater savings due to the

negotiated fees rather than the usual and

customary billing of out-of-network

pharmacies. The applicant represents

that it is projected that the Plan will

realize an additional savings of $15,000

by the addition of Rainbow to the PPN.

The requested exemption is also in the

interest of the Plan because preferred

pharmacies will be more conveniently

located as a result of the expanded PPN.

9. The applicant represents that the

PPN will be at least 50% composed of

preferred providers that are not

affiliated with Rainbow. All Plan

decisions with respect to the PPN,

including any decision to enter into the

Agreement with Rainbow, will be made

by Plan fiduciaries unrelated to

Rainbow. In this regard, any fiduciary

affiliated with Rainbow will remove

himself or herself from all consideration

by the Plan as to whether or not to

engage in the transaction. Lastly, the

applicant represents that the proposed

transaction is not part of an agreement,

arrangement or understanding designed

to benefit a party in interest.

10. In summary, the applicant

represents that the proposed transaction

satisfies the criteria contained in section

408(a) of the Act for the following

reasons: (a) The terms of the transaction

are at least as favorable to the Plan as

those the Plan could obtain in a similar

transaction with an unrelated party; (b)

any decision by the Plan to enter into

agreements governing the subject

purchases will be made by Plan

fiduciaries independent of Rainbow; (c)

at least 50% of the preferred providers

participating in the Preferred Pharmacy

Network (PPN) which will be selling

prescription drugs to the Plan’s

participants and beneficiaries will be

unrelated to Rainbow; (d) Rainbow will

provide prescription drugs to eligible

persons under the identical conditions

and for the identical amounts as under

the Snyder Drug Stores, Inc.(Snyder)

and SuperValue Pharmacies, Inc. (SPI)

Agreements; and (e) the transaction is

not part of an agreement, arrangement or

understanding designed to benefit a

party in interest.

For Further Information Contact: Mr.

J. Martin Jara of the Department,

telephone (202) 219–8881. (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

39442 Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices

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 20th day of

June, 2000.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 00–16019 Filed 6–23–00; 8:45 am]

BILLING CODE 4510–29–P

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

[Notice (00–072)]

Performance Review Board, Senior

Executive Service (SES)

AGENCY: National Aeronautics and

Space Administration (NASA).

ACTION: Notice of Membership of SES

Performance Review Board.

SUMMARY: The Civil Service Reform Act

of 1978, Pub. L. 95–454 (Section 405)

requires that appointments of individual

members to a Performance Review

Board be published in the Federal

Register.

The performance review function for

the SES in the National Aeronautics and

Space Administration is being

performed by the NASA Performance

Review Board (PRB) and the NASA

Senior Executive Committee. The latter

performs this function for senior

executives who report directly to the

Administrator or the Deputy

Administrator and members of the PRB.

The following individuals are serving

on the Board and the Committee:

Performance Review Board

Ghassem Asrar, Chairperson, Associate

Administrator for Earth Science,

NASA Headquarters

John T. Pennington, Executive

Secretary, Chief, Agency Executive

Personnel Branch, NASA Headquarters

Joan S. Peterson, Director, Personnel

Division, NASA Headquarters

Robert M. Stephens, Deputy General

Counsel, NASA Headquarters

Oceola S. Hall, Deputy Associate

Administrator for Equal Opportunity

Programs, NASA Headquarters

Earle K. Huckins, Deputy Associate

Administrator for Space Science

NASA Headquarters

Susan H. Garman, Associate Director,

NASA Johnson Space Center

William F. Townsend, Deputy Director,

NASA Goddard Space Flight Center

Kathie L. Olsen, Chief Scientist, Office

of the Administrator, NASA

Headquarters

Paula M. Cleggett, Deputy Associate

Administrator for Public Affairs,

NASA Headquarters

Delma C. Freeman, Deputy Director,

Langley Research Center

Carolyn S. Griner, Deputy Director,

NASA Marshall Space Flight Center

Wallace C. Sawyer, Deputy Director,

NASA Dryden Flight Research Center

Mark Craig, Deputy Director, NASA

Stennis Space Center

Senior Executive Committee

Daniel R. Mulville, Chairperson,

Associate Deputy Administrator,

NASA Headquarters

Joan S. Peterson, Executive Secretary,

Director, Personnel Division, NASA

Headquarters

Lori B. Garver, Associate Administrator

for Policy and Plans, NASA

Headquarters

Ghassem Asrar, Associate Administrator

for Earth Science, NASA

Headquarters

Vicki A. Novak, Associate

Administrator for Human Resources

and Education, NASA Headquarters

Daniel S. Goldin,

Administrator.

[FR Doc. 00–16042 Filed 6–23–00; 8:45 am]

BILLING CODE 7510–01–P

NATIONAL SCIENCE FOUNDATION

Committee Management; Renewals

The NSF management officials having

responsibility for the 29 advisory

committees listed below have

determined that renewing these groups

for another two years is necessary and

in the public interest in connection with

the performance of duties imposed upon

the Director, National Science

Foundation (NSF), by 42 USC 1861 et

seq. This determination follows

consultation with the Committee

Management Secretariat, General

Services Administration.

1. Special Emphasis Panel in Graduate

Education (#57)

2. Special Emphasis Panel in

Elementary, Secondary and Informal

Education (#59)

3. Advisory Committee for

Mathematical and Physical Sciences

(#66)

4. Special Emphasis Panel in

Engineering Education and Centers

(#173)

5. Advisory Committee for Computer

and Information Science and

Engineering (#1115)

6. . Advisory Committee for Social,

Behavioral and Economic Sciences

(#1171)

7. Committee on Equal Opportunities in

Science and Engineering (#1173)

8. Special Emphasis Panel in Advanced

Computational Infrastructure and

Research (#1185)

9. Special Emphasis Panel in

Astronomical Sciences (#1186)

10. Special Emphasis Panel in

Bioengineering and Environmental

Systems (#1189)

11. Special Emphasis Panel in Chemical

and Transport Systems (#1190)

12. Special Emphasis Panel in

Chemistry (#1191)

13. Special Emphasis Panel in

Computing—Communications

Research (#1192)

14. Special Emphasis Panel in

Experimental and Integrative

Activities (#1193)

15. Special Emphasis Panel in Design,

Manufacture and Industrial

Innovation (#1194)

16. Special Emphasis Panel in Electrical

and Communications Systems (#1196)

17. Special Emphasis Panel in

Experimental Program to Stimulate

Competitive Research (#1198)

18. Special Emphasis Panel in Human

Resource Development (#1199)

19. Special Emphasis Panel in

Information and Intelligent Systems

(#1200)

30. Special Emphasis Panel in Materials

Research (#1203)

21. Special Emphasis Panel in

Mathematical Sciences (#1204)

22. Special Emphasis Panel in Civil and

Mechanical Systems (#1205))

23. Special Emphasis Panel in

Advanced Networking and

Infrastructure Research (#1207)

24. Special Emphasis Panel in Physics

(#1208)

25. Special Emphasis Panel in Polar

Programs (#1209)

26. Special Emphasis Panel in Research,

Evaluation and Communications

(#1210)

27. Special Emphasis Panel in

Undergraduate Education (#1214)

28. Special Emphasis Panel in

Educational Systemic Reform (#1765)

29. Advisory Panel for Biomolecular

Processes (#5138)

Authority for these Committees will

expire on June 30, 2002, unless they are

renewed. For more information, please

contact Karen York, NSF, at (703) 306–

1182.