Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Notices 52061 

Regulations 30 CFR 57.5060, 57.5065, 

57.5066, 57.5070, 57.5071, and 

57.5075(a) and (b)(3). 

This information collection is subject 

to the PRA. A Federal agency generally 

cannot conduct or sponsor a collection 

of information, and the public is 

generally not required to respond to an 

information collection, unless it is 

approved by the OMB under the PRA 

and displays a currently valid OMB 

Control Number. In addition, 

notwithstanding any other provisions of 

law, no person shall generally be subject 

to penalty for failing to comply with a 

collection of information if the 

collection of information does not 

display a valid Control Number. See 5 

CFR 1320.5(a) and 1320.6. The DOL 

obtains OMB approval for this 

information collection under Control 

Number 1219–0135. The current 

approval is scheduled to expire on 

September 30, 2012; however, it should 

be noted that existing information 

collection requirements submitted to the 

OMB receive a month-to-month 

extension while they undergo review. 

For additional information, see the 

related notice published in the Federal 

Register on June 4, 2012 (77 FR 33002). 

Interested parties are encouraged to 

send comments to the OMB, Office of 

Information and Regulatory Affairs at 

the address shown in the ADDRESSES

section within 30 days of publication of 

this notice in the Federal Register. In 

order to help ensure appropriate 

consideration, comments should 

mention OMB Control Number 1219– 

0135. The OMB is particularly 

interested in comments that: 

• Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information, 

including the validity of the 

methodology and assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

e.g., permitting electronic submission of 

responses. 

Agency: DOL–MSHA. 

Title of Collection: Health Standards 

for Diesel Particulate Matter Exposure 

(Underground Metal and Nonmetal 

Mines). 

OMB Control Number: 1219–0135. 

Affected Public: Private sector— 

businesses or other for-profits. 

Total Estimated Number of 

Respondents: 173. 

Total Estimated Number of 

Responses: 28,022. 

Total Estimated Annual Burden 

Hours: 3,329. 

Total Estimated Annual Other Costs 

Burden: $509,532. 

Dated: August 22, 2012. 

Michel Smyth, 

Departmental Clearance Officer. 

[FR Doc. 2012–21194 Filed 8–27–12; 8:45 a.m.] 

BILLING CODE 4510–43–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

163rd Meeting of the Advisory Council 

on Employee Welfare and Pension 

Benefit Plans; Notice of 

Teleconference Meeting 

Pursuant to the authority contained in 

Section 512 of the Employee Retirement 

Income Security Act of 1974 (ERISA), 29 

U.S.C. 1142, the 163rd open meeting of 

the Advisory Council on Employee 

Welfare and Pension Benefit Plans (also 

known as the ERISA Advisory Council) 

will be held via teleconference on 

September 25, 2012. 

The meeting will take place in C5521 

Room 4, U.S. Department of Labor, 200 

Constitution Avenue NW., Washington, 

DC 20210. Public access is available 

only in this room (i.e. not by telephone). 

The meeting will run from 10:00 a.m. to 

approximately 4:00 p.m. The purpose of 

the open meeting is to discuss reports/ 

recommendations for the Secretary of 

Labor on the issues of (1) Managing 

Disability Risks in an Environment of 

Individual Responsibility; (2) Current 

Challenges and Best Practices 

Concerning Beneficiary Designations in 

Retirement and Life Insurance Plans; 

and (3) Examining Income Replacement 

During Retirement Years in a Defined 

Contribution Plan System. Descriptions 

of these topics are available on the 

Advisory Council page of the EBSA Web 

site at http://www.dol.gov/ebsa/ 

aboutebsa/erisa_advisory_council.html. 

Organizations or members of the 

public wishing to submit a written 

statement may do so by submitting 30 

copies on or before September 18, 2012 

to Larry Good, Executive Secretary, 

ERISA Advisory Council, U.S. 

Department of Labor, Suite N–5623, 200 

Constitution Avenue NW., Washington, 

DC 20210. Statements also may be 

submitted as email attachments in text 

or pdf format transmitted to 

good.larry@dol.gov. It is requested that 

statements not be included in the body 

of an email. Statements deemed relevant 

by the Advisory Council and received 

on or before September 18 will be 

included in the record of the meeting 

and made available in the EBSA Public 

Disclosure Room, along with witness 

statements. Do not include any 

personally identifiable information 

(such as name, address, or other contact 

information) or confidential business 

information that you do not want 

publicly disclosed. 

Individuals or representatives of 

organizations wishing to address the 

Advisory Council should forward their 

requests to the Executive Secretary or 

telephone (202) 693–8668. Oral 

presentations will be limited to ten 

minutes, time permitting, but an 

extended statement may be submitted 

for the record. Individuals with 

disabilities who need special 

accommodations should contact the 

Executive Secretary by September 18, 

2012 at the address indicated. 

Signed at Washington, DC this 22nd day of 

August, 2012. 

Michael L. Davis, 

Deputy Assistant Secretary, Employee 

Benefits Security Administration. 

[FR Doc. 2012–21126 Filed 8–27–12; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Application No. L–11688] 

Notice of Proposed Exemption 

Involving Sharp HealthCare Located in 

San Diego, CA 

AGENCY: Employee Benefits Security 

Administration, U.S. Department of 

Labor. 

ACTION: Notice of proposed exemption. 

SUMMARY: This document contains a 

notice of pendency (the Notice) before 

the Department of Labor (the 

Department) of a proposed individual 

exemption from certain prohibited 

transaction restrictions of the Employee 

Retirement Income Security Act of 1974 

(the Act or ERISA). The transactions 

involve the Sharp HealthCare Health 

and Dental Plan (the Plan). The 

proposed exemption, if granted, would 

affect the Plan, its participants and 

beneficiaries, Sharp Healthcare (Sharp), 

and the Sharp Health Plan (the HMO). 


srobinson on DSK4SPTVN1PROD with NOTICES
52062 Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Notices 

1The Summary of Facts and Representations is 

based on the Applicant’s representations and does 

not reflect the views of the Department. 

2The Applicant states that Sharp, its Board of 

Directors, Anne Stephenson, Ann Pumpian and 

Carlisle Lewis, III, Esq., are all fiduciaries within 

the meaning of section 3(21) of the Act. 

DATES: Effective Date: The proposed 

exemption, if granted, will be effective 

as of August 1, 2006. 

DATES: Written comments and requests 

for a public hearing on the proposed 

exemption should be submitted to the 

Department within 33 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 proposed exemption and 

the manner in which the person would 

be adversely affected by the exemption, 

if granted. 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 public hearing concerning the 

proposed exemption should be sent to 

the Office of Exemption Determinations, 

Employee Benefits Security 

Administration, Room N–5700, U.S. 

Department of Labor, 200 Constitution 

Avenue NW., Washington, DC 20210, 

Attention: Application No. L–11688. 

Interested persons are also invited to 

submit comments and/or hearing 

requests to EBSA via email or FAX. Any 

such comments or requests should be 

sent either by email to: 

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

(202) 219–0204 by the end of the 

scheduled comment period. The 

application 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. Comments and 

hearing requests will also be available 

online at www.regulations.gov and 

www.dol.gov/ebsa, at no charge. 

Warning: If you submit written 

comments or hearing requests, do not 

include any personally-identifiable or 

confidential business information that 

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

requests are posted on the Internet 

exactly as they are received, and they 

can be retrieved by most Internet search 

engines. The Department will make no 

deletions, modifications or redactions to 

the comments or hearing requests 

received, as they are public records. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Warren Blinder, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, U.S. 

Department of Labor, telephone (202) 

693–8553. (This is not a toll-free 

number.) 

SUPPLEMENTARY INFORMATION: This 

document contains a notice of proposed 

exemption that, if granted, would 

provide exemptive relief from sections 

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

406(b)(2) of the Act, effective August 1, 

2006, for the purchase of health 

insurance by the Plan from the HMO, a 

non-profit health maintenance 

organization wholly owned by the 

Plan’s sponsor, Sharp, through a 100% 

non-profit membership interest. 

Summary of Facts and 

Representations 1

1. Background 

Sharp is an integrated health care 

delivery system located in San Diego 

County. Sharp was created in 1946 as a 

non-profit association to raise funds to 

build a hospital and in 1955, based on 

a lead donation from Thomas E. Sharp, 

a hospital was built on 12.5 acres in 

Kearney Mesa, California. From that 

hospital, Sharp HealthCare has grown 

into a countywide system comprised of 

five hospitals, multiple clinics, and two 

pharmacies. 

In 1992, Sharp established its own 

licensed HMO through a subsidiary 

corporation called ‘‘Sharp Health Plan.’’ 

The HMO is a 501(c)(4) corporation and 

Sharp is its sole member, with 

appointment authority over 100% of the 

HMO’s Board of Director positions. The 

HMO offers a provider network that 

consists of 5 Sharp-affiliated hospitals, 

5 Sharp-affiliated urgent care clinics, 11 

Sharp-affiliated pharmacies, and 347 

Sharp-affiliated (or Sharp-contracted) 

physicians in 4 different medical 

groups. Additionally, the HMO offers 

access to 7 non-Sharp affiliated 

hospitals, 25 non-Sharp affiliated urgent 

care clinics, approximately 360 nonSharp affiliated pharmacies, and 570 

non-Sharp affiliated physicians 

comprised of 290 physicians in 4 

different medical groups, and 280 

independent physicians. The HMO is 

licensed by the California Department of 

Managed Health Care and is offered to 

San Diego employers and individuals. 

The Applicant notes that the HMO and 

Sharp’s facilities have a good reputation 

in San Diego County and have received 

numerous awards for quality over the 

years. Additionally, Sharp states that it 

has more licensed hospital beds than 

any other health care provider in San 

Diego County. 

Sharp provides health benefits to its 

employees under the Plan. As of March 

2012, the Plan had 10,993 participants 

and provided benefits to approximately 

24,339 individuals. In 1993, Sharp 

began providing its employees’ medical 

and vision benefits under the HMO. As 

the HMO is the only available option 

under the Plan, all participants were 

covered under the HMO. Each year, 

Sharp establishes a flat employee 

contribution rate for different levels of 

coverage (e.g., employee-only, employee 

plus-one, employee plus-family) and 

Sharp pays any remaining premiums 

based on the rates that it negotiates with 

the HMO. Between 2006 and 2010 

Sharp paid approximately 85% of the 

premium cost of such coverage and 

employees paid the remaining 15% 

through pre-tax salary deferral 

contributions. Employee contributions 

are collected by Sharp, put into its 

general account and used as part of the 

premium payment to the HMO. The 

Applicant represents that all such plan 

assets are spent on premiums almost 

immediately upon being withheld from 

employees’ paychecks. Employees also 

make co-payments directly to the actual 

providers of the medical care they 

receive, including Sharp, if the services 

have been provided in one of its 

facilities. 

The HMO sets premiums for Sharp 

employees based on the experience of 

the Sharp employee population, as is 

the case with its other employer clients. 

The Applicant notes that, as a nonprofit, the HMO only retains sufficient 

earnings to maintain its legally required 

reserves. In addition, the Applicant 

states that the HMO reduces its claims 

administration costs and is able to get 

better capitated rates from providers by 

pooling all of the covered lives under 

the HMO, rather than negotiating 

separate claims administration and 

capitated rate negotiations for just the 

Sharp employee population. According 

to the Applicant, this reduces the 

overall cost of health benefits under the 

Plan, ultimately reducing the cost Sharp 

employees pay for their coverage. 

Sharp is designated as the plan 

administrator of the Sharp HealthCare 

Group Health and Welfare Plan.2 In the 

past, Sharp’s Board of Directors had not 

appointed an administrative committee 

to act as the plan administrator on 

behalf of Sharp, but going forward, the 

Sharp Board of Directors will appoint a 

committee to act as the plan 

administrator for the Plan in place of 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Notices 52063 

3According to the Applicant, target net revenue 

is made up of all Sharp revenue, except ‘‘Medi-Cal’’ 

hospital fee program receipts, reduced by bad debt. 

4The Applicant maintains that the DOL and the 

IRS are of the view that, in the context of a nonprofit corporation, control may be exercised 

through appointment power over the Board of 

Directors rather than stock or partnership interests. 

See ERISA Opinion Letter 82–48A (September 16, 

1982), and Treasury Regulation 1.414(c)–5(b). The 

Department expresses no opinion herein as to the 

applicability of the aforementioned authorities to 

the covered transactions. 

5The Applicant represents that Sharp provides 

certain services to the HMO in connection with the 

operation of its integrated health care delivery 

system. The Applicant states that Sharp is of the 

view that these services are within the scope of 

Continued 

Sharp, which will be comprised of the: 

(1) Senior Vice President, General 

Counsel, (2) Senior Vice President/Chief 

Financial Officer, and (3) Vice 

President/Compensation and Benefits. 

The Applicant states that although each 

of these employees receives a portion of 

their compensation based on factors that 

include ‘‘target net revenue,’’ 3 Sharp’s 

use of the HMO for its employees has 

little, if any, impact on such 

compensation. The Applicant explains 

that the portion of target net revenue 

attributable to the Plan’s use of the 

HMO for its employees is immaterial, 

and any premiums that are paid to the 

HMO are ultimately offset as a revenue 

item by fees the HMO pays to Sharp for 

medical and other services. 

Sharp’s Vice President of 

Compensation and Benefits conducts an 

annual review to determine the 

reasonableness of total premiums paid 

by Sharp employees for coverage under 

the HMO. Sharp’s Vice President of 

Compensation and Benefits also reviews 

the ‘‘employee share’’ rates to make sure 

that they are competitive when 

compared to the rates their peer 

employers are charging. The Applicant 

notes that the Vice President of 

Compensation and Benefits has used the 

services of outside vendors, such as 

Keenan & Associates and SDH 

Consultants to assist her in this 

comparison, and based on these 

surveys, Sharp has concluded that the 

premiums paid, as well as the 

employees’ share of such premiums, for 

coverage under the HMO were 

reasonable. 

2. Request for Relief 

The Applicant represents that for 18 

years, Sharp has provided its employees 

with health insurance through the 

HMO, under the mistaken belief that 

this coverage was permissible under 

Prohibited Transaction Exemption (PTE) 

79–41, 44 FR 46365 (August 7, 1979). 

The Applicant relates that, on April 5, 

2011, the Los Angeles Regional Office of 

the Department of Labor (the 

Department) concluded an audit of the 

Plan and determined that the Plan’s 

provision of coverage under the HMO 

did not meet the requirements of 

Section II(a)(1) of PTE 79–41, as 

described below. 

PTE 79–41 provides that the 

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

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

taxes imposed by section 4975(a) and (b) 

of the Code, by reason of section 

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

shall not apply to the sale, in any 

taxable year, by an insurance company 

which is a party in interest or 

disqualified person with respect to an 

employee benefit plan, of life insurance, 

health insurance, and annuities if 

certain conditions are met. 

Section II(a) of PTE 79–41 provides 

that the insurance company making the 

sale must: 

(1) [Be] a party in interest or disqualified 

person with respect to the plan by reason of 

a stock or partnership (including a joint 

venture) affiliation with the employer 

establishing or maintaining the plan that is 

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

Act* * *, 

(2) [Be] licensed to sell insurance in at least 

one of the United States or in the District of 

Columbia, 

(3) [Have] obtained a Certificate of 

Compliance from the insurance 

commissioner of its domiciliary state within 

the 18 months prior to the date when the 

transaction is entered into or when such 

certificates were last made available by the 

domiciliary state, if earlier, and 

(4)(i) [Have] undergone a financial 

examination (within the meaning of the law 

of its domiciliary state) by the insurance 

commissioner of such state within 5 years 

prior to the end of the year preceding the 

year in which the sale occurred, or 

(ii) [Have] undergone an examination by an 

independent certified public accountant for 

its last completed taxable year. 

The Applicant states that Section 

II(a)(1) has not been complied with 

because Sharp does not have a stock or 

partnership interest in the HMO, but 

instead is the sole member of the HMO, 

and as such, has the power to appoint 

100% of the HMO’s Board of Directors. 

Nevertheless, the Applicant contends 

that Sharp’s control of the HMO is no 

less complete than it would be if 

Sharp’s ownership interest was 

denominated in the form of stock or a 

partnership interest.4

The Applicant maintains that the 

general premise undergirding PTE 79– 

41 is no less applicable in the case of 

a non-profit health care system whose 

ownership is through membership 

rather than a shareholder interest. In 

this regard, the Applicant states that 

health systems that maintain their own 

HMO or insurance policies invariably 

use those policies to provide health 

insurance benefits to their own 

employees. Thus, according to the 

Applicant, it would be ‘‘contrary to 

ordinary business practices, and 

unnecessarily restrictive, to require’’ an 

employer who is in the business of 

selling health insurance to purchase 

such health insurance for its employees 

from a competitor. 

Furthermore, Sharp contends that its 

control of the HMO via a non-profit 

membership interest presents a nonsubstantive, technical violation of the 

class exemption that has no bearing on 

the relief afforded to the Plan and its 

parties in interest, or the protection of 

the interests of the Plan and its 

participants and beneficiaries. The 

Applicant states that the relationship 

between Sharp and the HMO reflects the 

‘‘qualities’’ behind PTE 79–41’s 

affiliation requirement. In this regard, 

the Applicant observes that Sharp and 

the HMO are part of a closely connected 

system that have a common mission and 

integrated operations, and that Sharp 

could not find an independent carrier 

that would be as responsive to employer 

and participant needs as the HMO. 

According to the Applicant, the fact that 

Sharp and the HMO are non-profit 

corporations and do not have stock or 

partnership interests, and, therefore, 

exercise control through Sharp’s Board 

of Directors’ appointment authority, 

does not in any way diminish Sharp’s 

control over and comprehensive 

integration with the HMO. Thus, the 

Applicant submits that Sharp’s failure 

to meet the affiliation condition of PTE 

79–41, as described herein, is merely 

technical in nature and not meaningful 

to the Department’s granting of relief 

under PTE 79–41. 

The Applicant is therefore requesting 

a retroactive exemption from sections 

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

406(b)(2) of the Act for the Plan’s 

purchase of health care coverage from 

the HMO, which Sharp wholly-owns 

through a non-profit membership 

interest, effective August 1, 2006 

through and until the date of 

publication of a final grant of exemption 

in the Federal Register. Furthermore, 

the Applicant is requesting a 

prospective exemption from sections 

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

406(b)(2) of the Act for the Plan’s 

continued purchase of health care 

coverage from the HMO, which Sharp 

wholly-owns through a non-profit 

membership interest, effective as of the 

date of publication of a final grant of 

exemption in the Federal Register.5


srobinson on DSK4SPTVN1PROD with NOTICES
52064 Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Notices 

exemptive relief provided by section 408(b)(2) of 

ERISA. The Department is expressing no opinion 

herein regarding whether the provision of a service 

by Sharp to the HMO in connection with the 

operation of its integrated health care delivery 

system is within the scope of relief provided by that 

statutory exemption. 

6The Applicant also notes that Sharp has 

historically paid a majority of the Plan’s premiums 

that are paid to the HMO and employee 

contributions have always constituted less than half 

of the cost of coverage. 

7As stated above, Sharp has previously employed 

the firms of Keenan and Associates and SDH 

Consultants to conduct these surveys. 

8Sharp officials believe that surveying COBRA 

premiums charged by other large hospitals in the 

San Diego County area will give an ‘‘apples-toapples’’ comparison of premiums that are actually 

being paid by employers with similar demographics 

to Sharp, since, under COBRA, the ‘‘applicable 

premium’’ is the cost or 102% of the cost actually 

paid by the employer for such coverage. 

9The Applicant notes that Plan participants in 

the HMO are able to select any health care provider 

in the HMO’s network, regardless of whether they 

are affiliated with Sharp, but in an HMO (rather 

than a Preferred Provider Organization) participants 

are not allowed to select health care providers 

outside the HMO’s network, except in case of 

emergency. 

After considering the Applicant’s 

request, the Department has determined 

to propose an individual prohibited 

transaction exemption. The proposed 

exemption has been requested in an 

application filed by Sharp pursuant to 

section 408(a) of ERISA and in 

accordance with the procedures set 

forth in 29 CFR 2570, Subpart B (55 FR 

32836, August 10, 1990). 

3. Compliance With Conditions of PTE 

79–41 

The Applicant urges the Department 

to propose exemptive relief, because, 

according to the Applicant, all of the 

conditions of relief required under PTE 

79–41 have been satisfied with respect 

to the Sharp arrangement described 

herein, except the condition in Section 

II(a)(1), requiring that Sharp control the 

HMO via a stock or partnership 

ownership interest. In this regard, the 

Applicant represents that the HMO: Is 

licensed as an HMO in California by the 

Department of Managed Healthcare; has 

been certified by the California 

Department of Managed Healthcare as 

being in compliance with the 

requirements for a licensed HMO within 

the last 18 months; and has undergone 

a financial examination by the 

California Department of Managed 

Healthcare within the last five years and 

is audited by an independent certified 

public accountant each year, including 

its last completed taxable year. 

Therefore, the Applicant maintains that 

Sharp has satisfied the conditions set 

forth in Sections II(a)(2), (3), and (4) of 

PTE 79–41. The Applicant also 

represents that the amount the Plan 

pays to Sharp for HMO coverage is 

reasonable and does not exceed the 

amount that would be paid for similar 

services in an arm’s length transaction 

between unrelated parties, thereby 

satisfying Section II(b) of PTE 79–41. 

The Applicant also represents that no 

commissions are paid by the Plan for 

the insurance coverage purchased from 

the HMO, thereby satisfying Section 

II(c) of PTE 79–41. Finally, the 

Applicant states that the total HMO 

premiums collected for participants in 

the Plan (including employee and 

employer payments) have always, 

during the period covered by this 

application, been less than 50% of total 

premiums collected by the HMO. 

Therefore, the Applicant maintains that 

the condition contained in Section II(d) 

of PTE 79–41 is satisfied. 

4. Additional Protections 

According to the Applicant, the HMO, 

as a licensed HMO in California, 

employs an underwriter and contracts 

with an actuary to calculate the 

appropriate premiums that it charges to 

employers who purchase group HMO 

contracts from the HMO. According to 

the Applicant, this analysis involves a 

study of industry trends and also the 

particular demographics of the 

employer’s workforce and, for a 

continuing employer, such as Sharp, a 

review of the historic experience that 

the HMO has had with the employer’s 

population. Based on this underwriting 

analysis, premiums are set for a contract 

year.6

In addition, the Applicant states that 

it also conducts its own survey of 

premiums that are being paid for HMO 

coverage by other San Diego area 

hospitals, using the services of thirdparty benefit consultants to conduct 

these surveys.7 The Applicant explains 

that, under these third party surveys, 

each of the large hospitals in San Diego 

County are anonymously surveyed as to 

the COBRA rates they are charging.8 The 

Applicant maintains that the premiums 

that have been paid by Sharp to the 

HMO are within the market price paid 

by similarly situated employers in San 

Diego County. Based on these two 

separate methodologies, Sharp and its 

individual fiduciaries have concluded 

that the amount the Plan pays to Sharp 

for HMO coverage is reasonable and 

does not exceed the amount that would 

be paid for similar services in an arm’s 

length transaction between unrelated 

parties. 

The Applicant notes that Sharp will 

continue with these efforts, going 

forward, and will commit to hiring an 

independent third-party consultant each 

year to issue a formal report. According 

to the Applicant, the consultant will 

determine whether the amount 

employees and/or their dependents pay 

for coverage is reasonable and does not 

exceed the amount that would have 

been paid for similar services in an 

arm’s length transaction between 

unrelated parties. This amount will 

include the cost of co-payments and 

other out-of-pocket expenses for such 

coverage borne by participants and/or 

their dependents, and copies of the 

certification will be distributed to Plan 

participants along with summaries of 

health care costs for similar, competing 

health care providers. 

The Applicant states that if the 

proposed exemption is granted, the 

Board of Directors of Sharp will appoint 

a committee (the Plan Committee) 

consisting of the Senior Vice President 

and General Counsel, the Senior Vice 

President and Chief Financial Officer, 

and the Vice President, Compensation 

and Benefits, and such other 

representatives as the Board may deem 

appropriate, which will annually 

ascertain and certify in writing that the 

above requirements of this proposed 

exemption, if granted, continue to be 

met. 

5. Merits of the Covered Transactions 

The Applicant states that the covered 

transactions are in the interest of the 

Plan and its participants and 

beneficiaries. The Applicant maintains 

that the covered transactions allow the 

Plan to provide quality medical 

coverage to its participants at a lower 

price and in a manner that harmonizes 

with the business practices of employers 

who are in the insurance and health 

care industry. Sharp maintains that 

participants in the Plan pay for less than 

half of the Plan’s cost for coverage under 

the HMO and by electing coverage 

under the HMO, participants have 

access to a wide range of high quality 

Sharp and non-Sharp affiliated health 

care providers.9 Furthermore, if the 

exemption is denied, the Applicant 

maintains that the Plan and its 

participants and beneficiaries will lose 

their coverage under the HMO and will 

no longer be able to use Sharp 

providers, creating a hardship for the 

many Sharp employees who have 

demonstrated a preference for being 

treated in Sharp’s health care system. 

The Applicant represents that the 

savings garnered from the HMO’s 

efficiencies of scale, and the lack of 

need for commissions, redounds to the 

benefit of Plan participants. In this 

regard, the Applicant explains that there 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Notices 52065 

10The Applicant notes that the Department of 

Managed Health Care also reviews and approves all 

HMO provisions for compliance with its rules and 

regulations. 

is no need to retain a broker and pay a 

commission for the retention of the 

Plan’s HMO coverage. Additionally, 

since the HMO also covers the health 

plans of other employers, Sharp is able 

to achieve economies of scale on its risk, 

claims processing, administration and 

health care provider capitation costs 

that further drive down the overall cost 

of Plan medical benefits for employees 

under the Plan. 

Moreover, the Applicant represents 

that an exemption, if granted, would be 

administratively feasible because the 

covered transactions are standard for 

employers who are in the insurance and 

health care industry. The Applicant also 

observes that, because the HMO is a 

fully licensed HMO carrier whose 

claims processing activities are subject 

to regulation and periodic review by the 

California Department of Managed 

Health Care, no third party audit of its 

claims processing is necessary.10

Finally, the Applicant states that Sharp 

has complied with, and will continue to 

comply with the conditions of PTE 79– 

41 (with the exception of the affiliation 

requirement). 

Notice to Interested Persons 

Notice of the proposed exemption 

will be provided to all interested 

persons in the manner agreed upon by 

the Applicant and the Department 

within 3 days of the date of publication 

in the Federal Register. 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 to 

request a hearing with respect to the 

pending exemption. Written comments 

and hearing requests are due within 33 

days of the publication of the notice of 

proposed exemption in the Federal 

Register. 

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 ERISA does not relieve a 

fiduciary or other party in interest from 

certain other provisions of ERISA, 

including any prohibited transaction 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of section 404 

of ERISA, 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 ERISA; 

(2) Before an exemption may be 

granted under section 408(a) of ERISA, 

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 exemption, if 

granted, will be supplemental to, and 

not in derogation of, any other 

provisions of ERISA, 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 exemption, if 

granted, will be subject to the express 

condition that the material facts and 

representations contained in the 

application are true and complete, and 

that the application accurately describes 

all material terms of the transaction 

which is the subject of the proposed 

exemption. 

Proposed Exemption 

Based on the facts and representations 

set forth in the application, the 

Department is considering granting the 

requested 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), as follows: 

Section I. Covered Transactions 

A. If the proposed exemption is 

granted, the restrictions of sections 

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

406(b)(2) of the Act shall not apply, 

effective August 1, 2006 through and 

until the date of publication in the 

Federal Register of a final grant of 

exemption, to the purchase of health 

insurance by the Sharp HealthCare 

Health and Dental Plan (the Plan) from 

the Sharp Health Plan (the HMO), 

provided that the conditions of Section 

II have been met. 

B. If the proposed exemption is 

granted, the restrictions of sections 

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

406(b)(2) of the Act shall not apply, 

effective as of the date of publication in 

the Federal Register of a final grant of 

exemption, to the purchase of health 

insurance by the Plan from the HMO, 

provided that the conditions of Section 

II and Section III are met. 

Section II. General Conditions 

(a) Sharp is the sole member of the 

HMO, and more than 50% of the 

appointment power for the HMO’s 

Board of Directors is held by Sharp. 

(b) Sharp is licensed to sell HMO 

coverage in the State of California. 

(c) The HMO is certified by the 

California Department of Managed 

Health Care as being in compliance with 

the requirements for a licensed HMO 

within the last 18 months. 

(d) The HMO has undergone a 

financial examination by the California 

Department of Managed Health Care 

within the past 5 years and will 

continue to undergo such financial 

examinations at least once every five 

years. 

(e) The HMO has been, and will 

continue to be, examined by an 

independent certified public accountant 

annually. 

(f) The amount the Plan pays to Sharp 

for HMO coverage is reasonable and 

does not exceed the amount the Plan 

would have paid for similar services in 

an arm’s length transaction between 

unrelated parties. 

(g) All HMO-offered health care 

providers meet all applicable licensure 

requirements and certifications. 

(h) The HMO offers a sufficient 

number of non-Sharp affiliated health 

care providers to effectively allow Plan 

participants the opportunity to receive 

health care services from either Sharp or 

non-Sharp affiliated health care 

providers. 

(i) No commissions are paid by the 

Plan with respect to the sale of HMO 

coverage. 

(j)(i) With respect to the relief 

provided in section I. A., for each 

taxable year of the HMO, the gross 

premiums received in that taxable year 

by the HMO from the Plan did not 

exceed 50% of the gross premiums 

received by the HMO for all HMO 

coverage issued in that taxable year; or 

(ii) with respect to the relief provided in 

section I. B., for each taxable year of the 

HMO, the gross premiums received in 

that taxable year by the HMO from the 

Plan will not exceed 50% of the gross 

premiums received by the HMO for all 

HMO coverage issued in that taxable 

year. 

(k) Sharp maintains or causes to be 

maintained for a period of six years 

from the date of any covered transaction 

hereunder such records as are necessary 

to enable the persons described in 

paragraph (l)(i) below to determine 

whether the conditions of this proposed 

exemption, if granted, have been met, 

provided that (i) a separate prohibited 

transaction will not be considered to 


srobinson on DSK4SPTVN1PROD with NOTICES
52066 Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Notices 

have occurred if, due to circumstances 

beyond the control of Sharp, the records 

are lost or destroyed prior to the end of 

the six-year period, and (ii) no party in 

interest other than Sharp shall be 

subject to a civil penalty that may be 

assessed under section 502(i) of the Act, 

if such records are not maintained, or 

are not available for examination as 

required by paragraph (l)(i) below. 

(l)(i) Except as provided below in 

paragraph (l)(ii), and notwithstanding 

any provisions of subsections (a)(2) and 

(b) of section 504 of the Act, the records 

referred to above in paragraph (k) are 

unconditionally available at their 

customary location for examination 

during normal business hours by: 

(A) Any duly authorized employee or 

representative of the Department, 

(B) Any duly authorized 

representative of the California 

Department of Managed Health Care or 

any State or Federal governmental body 

responsible for regulatory oversight of 

Sharp or the HMO, and 

(C) Any fiduciary of the Plan or the 

Plan’s authorized representative; and 

(ii) None of the persons described 

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

authorized to examine trade secrets of 

Sharp, or commercial or financial 

information which is privileged or 

confidential, and should Sharp refuse to 

disclose information on the basis that 

such information is exempt from 

disclosure, Sharp 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. 

Section III. Prospective Conditions 

(a) Sharp retains annually the services 

of an independent third-party 

consultant to determine whether the 

amount employees and/or their 

dependents pay for coverage is 

reasonable and does not exceed the 

amount that would be paid for similar 

services in an arm’s length transaction 

between unrelated parties, which 

amount includes the cost of copayments and other out-of-pocket 

expenses for such coverage borne by 

participants and/or their dependents, 

and written copies of such 

determination are distributed to Plan 

participants along with summaries of 

health care costs for similar, competing 

health care providers. 

(b) The Board of Directors of Sharp 

appoints a committee (the Plan 

Committee) consisting of the Senior 

Vice President and General Counsel, the 

Senior Vice President and Chief 

Financial Officer, the Vice President, 

Compensation and Benefits, and such 

other representatives as the Board of 

Directors may deem appropriate. The 

Plan Committee will annually ascertain 

and certify in writing that the above 

requirements of this proposed 

exemption, if granted, continue to be 

met. 

Signed at Washington, DC, this 17th day of 

August, 2012. 

Lyssa E. Hall, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2012–21158 Filed 8–27–12; 8:45 am] 

BILLING CODE 4510–29–P 

LEGAL SERVICES CORPORATION 

Sunshine Act Meeting 

DATE AND TIME: The Legal Services 

Corporation’s Board of Directors will 

meet telephonically on August 31, 2012. 

The meeting will commence at 11 a.m., 

Eastern Daylight Time, and will 

continue until the conclusion of the 

Board’s agenda. 

LOCATION: F. William McCalpin 

Conference Room, Legal Services 

Corporation Headquarters, 3333 K Street 

NW., Washington DC 20007. 

PUBLIC OBSERVATION: Members of the 

public who are unable to attend in 

person but wish to listen to the public 

proceedings may do so by following the 

telephone call-in directions provided 

below but are asked to keep their 

telephones muted to eliminate 

background noises. To avoid disrupting 

the meeting, please refrain from placing 

the call on hold. From time to time, the 

presiding Chair may solicit comments 

from the public. 

CALL–IN DIRECTIONS FOR OPEN SESSIONS: 

• Call toll-free number: 1–866–451– 

4981; 

• When prompted, enter the 

following numeric pass code: 

5907707348; 

• When connected to the call, please 

immediately ‘‘MUTE’’ your telephone. 

STATUS OF MEETING: Open, except that, 

upon a vote of the Board of Directors, 

a portion of the meeting may be closed 

to the public to discuss a candidate for 

the position of Vice President for Grants 

Management. A verbatim written 

transcript will be made of the closed 

session of the Board of Directors 

meeting. The transcript of any portion of 

the closed session falling within the 

relevant provisions of the Government 

in the Sunshine Act, 5 U.S.C. 552b(c)(6), 

and the corresponding provision of the 

Legal Service’s Corporation’s 

implementing regulations, 45 CFR 

1622.5(e), will not be available for 

public inspection. A copy of the General 

Counsel’s Certification that in his 

opinion the closing is authorized by law 

will be available upon request. 

Matters To Be Considered 

Open Session 

1. Approval of agenda 

2. Approval of minutes of the Board’s 

meeting of July 27, 2012 

3. Consider and act on the Finance 

Committee’s recommendation to the 

Board on the appropriations request 

for FY 2014 (Resolution 2012–XXX) 

4. Consider and act on the Strategic Plan 

5. Consider and act on a resolution 

abolishing the Office of Vice 

President for Programs and 

Performance and establishing the 

Office of Vice President for Grants 

Management (Resolution 2012– 

XXX) 

6. Consider and act on whether to 

authorize an executive session of 

the Board 

Closed Session 

7. Discussion of candidate for the Office 

of Vice President for Grants 

Management 

Open Session 

8. Consider and act on a resolution on 

the appointment of a Vice President 

for Grants Management (Resolution 

2012–XXX) 

9. Public comment 

10. Consider and act on other business 

11. Consider and act on motion to 

adjourn the meeting 

CONTACT PERSON FOR INFORMATION: 

Katherine Ward, Executive Assistant to 

the Vice President & General Counsel, at 

(202) 295–1500. Questions may be sent 

by electronic mail to 

FR_NOTICE_QUESTIONS@lsc.gov. 

NON–CONFIDENTIAL MEETING MATERIALS: 

Non-confidential meeting materials will 

be made available in electronic format at 

least 24 hours in advance of the meeting 

on the LSC Web site, at http:// 

www.lsc.gov/board-directors/meetings/ 

board-meeting-notices/non-confidentialmaterials-be-considered-open-session. 

ACCESSIBILITY: LSC complies with the 

American’s with Disabilities Act and 

Section 504 of the 1973 Rehabilitation 

Act. Upon request, meeting notices and 

materials will be made available in 

alternative formats to accommodate 

individuals with disabilities. 

Individuals who need other 

accommodations due to disability in 

order to attend the meeting in person or 

telephonically should contact Katherine 

Ward, at (202) 295–1500 or 

FR_NOTICE_QUESTIONS@lsc.gov, at 

least 2 business days in advance of the 


srobinson on DSK4SPTVN1PROD with NOTICES