10074 Federal Register / Vol. 62, No. 43 / Wednesday, March 5, 1997 / Notices

1The Department expresses no opinion herein on

whether the acquisition and holding of the Units by

the Plan violated any of the provisions of Part 4 of

Title I of the Act.

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Application No. D–10307, et al.]

Proposed Exemptions; ADP Fluor

Daniel, Incorporated Retirement

Savings Plan (the Plan)

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 restriction 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

Unless otherwise stated in the Notice

of Proposed Exemption, all interested

persons are invited to submit written

comments, and with respect to

exemptions involving the fiduciary

prohibitions of section 406(b) of the Act,

requests for hearing within 45 days from

the date of publication of this Federal

Register Notice. Comments and request

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. 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, NW.,

Washington, DC 20210. Attention:

Application No. 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 Pension and Welfare Benefits

Administration, U.S. Department of

Labor, Room N–5507, 200 Constitution

Avenue, NW., Washington, DC 20210.

Notice of 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 (43 FR 47713, October 17, 1978)

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.

ADP Fluor Daniel, Incorporated

Retirement Savings Plan (The Plan)

Located in Tucson, Arizona

(Application No. D–10307)

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 32847, August 10, 1990). If the

exemption is granted, the restrictions of

sections 406(a) and 406(b) (1) and (2) of

the Act and the sanctions resulting from

the application of section 4975(c)(1) (A)

through (E) of the Code, shall not apply

to the proposed sale by the Plan of two

limited partnership interests (the Units)

to ADP Fluor Daniel, Incorporated, a

party in interest with respect to the

Plan, providing the following conditions

are satisfied: (1) the sale is a one-time

transaction for cash; (2) the Plan pays no

commissions nor other expenses

relating to the sale; and (3) the purchase

price is the greater of: (a) The fair

market value of the Units as determined

by a qualified, independent appraiser,

or (b) the original acquisition and

holding costs, plus attributable

opportunity costs.

Summary of Facts and Representations

1. The Plan is a combination 401(K)

and profit sharing plan sponsored by

ADP Fluor Daniel, Incorporated (ADP).

ADP is an Arizona corporation engaged

in the business of international

architecture and engineering. As of

December 31, 1994, the Plan had 250

participants and assets with a fair

market value of approximately

$4,642,585.00.

2. Among the assets of the Plan are

the Units, which are two shares of the

Central Corridor-Osborn Investors

Limited Partnership (the Limited

Partnership), an Arizona limited

partnership. The Plan’s percentage

ownership represented by its Units in

the Limited Partnership is 3.11%. The

Limited Partnership owns a 2.26 acre

property located at the southeast corner

of Central Avenue and Osborn Road, in

Phoenix, Arizona. The Plan acquired the

Units directly from the Limited

Partnership, an unrelated third party, in

1987. The decision to acquire the Units

was made by the Plan trustees; Richard

Anderson, Philip Owen, Dale Harman,

Solomon Pan, and Michael Stanley (the

Trustees).1 It is represented that the Plan

paid a total of $25,000 to acquire the

Units and subsequently made additional

cash contributions and various other

payments totaling $34,800 between

1989 and 1996 in connection with the

holding of the Units. It is further

represented that the Plan never derived

any income from the investment in the

Units to offset the expenditures made by

the Plan related to the acquisition and

holding of the Units. In this regard, it is

represented that the cumulative costs

paid by the Plan in connection with the

acquisition and holding of the Units is

$59,800.

3. The Applicant represents that the

Plan wishes to sell the Units in order to

divest itself of an asset which has and

may continue to depreciate in value. It

is further represented that the Units

which are not publicly traded are

incompatible with the Plan’s new

administrative investment features,

which permits participants to access

daily valuations and to individually

direct the investments of their accounts.

Selling the Units to ADP will enable the

Plan to convert an illiquid, non-publicly

traded real estate investment into cash,
Federal Register / Vol. 62, No. 43 / Wednesday, March 5, 1997 / Notices 10075

2As discussed herein, TA Funds are expected to

be organized as venture capital operating

companies that are managed by TA.

which will then be allocated to the

accounts of participants and invested

pursuant to the direction of those

participants.

The Applicant obtained an

independent appraisal of the units from

Gary Ringel, President of U.S.L.

Valuation, Inc., a real estate appraiser

and consultant located in Scottsdale,

Arizona. After reviewing the pertinent

data, Mr. Ringel estimated that the

Units’ fair market value as of April 30,

1996 was $20,800.

4. The Applicant proposes to

purchase the Units from the Plan for

$85,072, which will be allocated on a

pro rate basis among the participants’

accounts that are invested in the Units.

This amount represents the greater of:

(a) The fair market value of the Units as

determined by a qualified, independent

appraiser, or (b) the Units’ original

acquisition and holding costs to the

Plan plus opportunity costs attributable

to the Units. It is represented, that

because the fair market value of the

Units is less than their acquisition cost,

ADP will purchase the units for the

latter amount. Taking into account the

purchase price of the Units ($25,000)

and the associated holding costs

($25,272), the Plan will receive a rate of

return approximately equal to six

percent for each of the eight years that

the Plan has held the Units.

The Applicant represents that the

subject transaction is in the interest of

the Plan because if the Plan sold the

Units on the open market, the Plan

would receive substantially less than

the amount the Applicant is willing to

pay. In addition, the Plan could not at

this time sell the Units to an unrelated

third party at other than a substantial

discount.

5. In summary, the Applicant

represents that the subject transaction

satisfies the statutory criteria for an

exemption under section 408 of the Act

for the following reasons: (1) The sale

will be a one-time transaction for cash;

(2) the Plan will not pay commissions

nor other expenses relating to the sale;

(3) the sale will enhance the liquidity of

the assets of the Plan; and (4) the

purchase price will be the greater of: (a)

the fair market value of the Units as

determined by a qualified, independent

appraiser, or (b) the original acquisition

and holding costs of the Units plus

attributable opportunity costs.

Tax Consequences of Transaction

The Department of the Treasury has

determined that if a transaction between

a qualified employee benefit plan and

its sponsoring employer (or affiliate

thereof) results in the plan either paying

less than or receiving more than fair

market value, such excess may be

considered to be a contribution by the

sponsoring employer to the plan and

therefore must be examined under

applicable provisions of the Code,

including sections 401(a)(4), 404 and

415.

Notice to Interested Persons

Notice of the proposed exemption

shall be given to all interested persons

by personal delivery and by first-class

mail within 10 days of publication of

the notice of pendency 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/

or request a hearing with respect to the

proposed exemption. Comments and

requests for a hearing are due within 40

days of the date of publication of the

notice in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms.

Janet L. Schmidt of the Department,

telephone (202) 219–8883. (This is not

a toll-free number.)

TA Associates, Inc. (TA Associates)

Located in Boston, MA

(Application No. D–10314)

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) 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 (D) of the Code shall not apply,

effective December 29, 1993, to the

making, by an employee benefit plan

(the Plan), of capital contributions to

any venture capital fund (the TA Fund)

that is organized, sponsored and/or

managed by TA Associates and/or any

of its affiliates (collectively, TA)

pursuant to a contractual obligation by

a Plan having an interest in the TA

Fund.2

This proposed exemption is subject to

the following conditions:

(a) At the time the Plan undertakes

the obligation to make such capital

contributions (the Determination Date),

the TA Fund is not a party in interest

with respect to the Plan.

(b) The decision to make a capital

contribution to a TA Fund is made on

behalf of the Plan by a Plan fiduciary

which is independent of and unrelated

to TA and the portfolio company whose

interest is acquired by the TA Fund.

(c) TA does not otherwise provide

investment advice to the Plan within the

meaning of Regulation section 29 CFR

2510.3–21(c) with respect to such Plan’s

assets that are invested in the TA Fund.

(d) At the Determination Date, the

Plan has aggregate assets that are in

excess of $50 million. In the case of

multiple Plans which are invested

through a master or group trust in a TA

Fund, the assets of which are ‘‘plan

assets’’ under 29 CFR 2510.3–101 (the

Plan Asset Regulation), the $50 million

threshold applies to the aggregate assets

of such trust.

(e) Subsequent to the Determination

Date, the TA Fund is a party in interest

with respect to the Plan solely by reason

of a relationship to a portfolio company

which is a service provider to a Plan, as

described in section 3(14) (H) or (I) of

the Act, including a fiduciary with

respect to such Plan.

(f) At the Determination Date, the

capital commitment of the Plan

(together with the capital commitments

of any other Plans maintained by the

same employer or employee

organization) with respect to the TA

Fund, does not exceed 15 percent of the

total capital commitments with respect

to such TA Fund.

(g) At the Determination Date, the

percentage of the Plan’s assets

committed to be invested in the TA

Fund does not exceed 5 percent of the

Plan’s total assets.

(h) At the Determination Date, a

Plan’s aggregate capital commitment to

all TA Funds does not exceed 25

percent of the Plan’s total assets.

(i) The Plan receives the following

initial and ongoing disclosures with

respect to the TA Fund:

(1) A copy of the private placement

memorandum applicable to the TA

Fund or another comparable document

containing substantially the same

information;

(2) A copy of the limited partnership

or other agreement establishing the TA

Fund;

(3) A copy of the subscription

agreement applicable to the TA Fund, if

any;

(4) Copies of the proposed exemption

and grant notice related to the

exemptive relief described herein; and

(5) Periodic, but no less frequently

than annually, reports relating to the

overall financial position and

operational results of the TA Fund
10076 Federal Register / Vol. 62, No. 43 / Wednesday, March 5, 1997 / Notices

3Regulation section 29 CFR 2510.3–101(c) of the

Plan Asset Regulation defines the term ‘‘operating

company’’ as an entity that is primarily engaged,

directly or through a majority-owned subsidiary or

subsidiaries, in the production or sale of a product

or service other than the investment of capital. The

term ‘‘operating company’’ includes a ‘‘venture

capital operating company.’’

Regulation section 29 CFR 2510.3–101(d)

provides, in part, that an entity is a ‘‘venture capital

operating company’’ if at least 50 percent of its

assets are invested in venture capital investments,

and the entity, in the ordinary course of its

business, actually exercises management rights with

respect to one or more operating companies in

which it invests. Regulation section 29 CFR 2510.3–

101(d)(3) explains that a venture capital investment

is an investment in an operating company (other

than a venture capital operating company) as to

which the investor has or obtains management

rights. The term ‘‘management rights’’ is defined

under regulation section 29 CFR 2510.3–

101(d)(3)(ii) to mean contractual rights directly

between the investor and an operating company to

substantially participate in, or substantially

influence the conduct of, the management of the

operating company. 4Regulation section 2510.3–101(f)(1) states, in

pertinent part, that equity participation in an entity

by benefit plan investors is ‘‘significant’’ on any

date, if immediately after the most recent

acquisition of any equity interest in the entity, 25

percent or more of the value of any class of equity

interests in the entity is held by benefit plan

investors.

5The Department is providing no opinion with

regard to whether a TA Fund is a venture capital

operating company or whether the equity

participation by Plans investing in a TA Fund is not

significant. In addition, the Department is not

expressing any views with respect to the

compensation that is paid to TA by a TA Fund.

6According to the applicant, the term ‘‘portfolio

company’’ refers to each of the operating companies

in which a venture capital fund has made an

investment. Thus, for example, when a venture

capital fund, such as a TA Fund, makes an

investment in a start-up, high tech company, that

company becomes one of the venture capital fund’s

portfolio companies and will remain so as long as

the venture capital fund retains its investment in

that high tech company. Similarly, if a venture

capital fund acquires an interest in an investment

management firm, the investment management firm

will become a portfolio company of the venture

capital fund.

including copies of the TA Fund’s

annual financial statements.

(j) With respect to capital

contributions made to a TA Fund by a

Plan after the date of issuance of the

final exemption, TA maintains or causes

to be maintained for a period of six

years from the date of the transaction

the records necessary to enable the

persons described in paragraph (k) to

determine whether the conditions of

this exemption have been met, except

that—

(1) A prohibited transaction will not

be considered to have occurred, if due

to circumstances beyond the control of

TA, the records are lost or destroyed

prior to the end of the six year period;

and

(2) No party in interest, other than

TA, shall be subject to the civil penalty

that may be assessed under section

502(i) of the Act, or to the taxes imposed

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

if the records are not maintained, or are

not available for examination as

required by paragraph (k). (k)(1) Except as provided in paragraph

(k)(2) and notwithstanding any

provisions of subsection (a)(2) and (b) of

section 504 of the Act, the records

referred to in paragraph (j) are

unconditionally available at their

customary location for examination

during normal business hours by— (A) Any duly authorized employee or

representative of the Department or the

Internal Revenue Service;

(B) Any fiduciary of a Plan who has

an interest in the TA Fund and has the

authority to acquire or dispose of the

interest of the Plan in the TA Fund, or

any duly authorized employee or

representative of such fiduciary; and (C) Any participant or beneficiary of

any Plans or duly authorized employee

or representative of such participant or

beneficiary. (2) None of the persons described in

paragraph (k)(1)(B) and (k)(1)(C) shall be

authorized to examine trade secrets of

TA or commercial or financial

information which is privileged or

confidential.

EFFECTIVE DATE: If granted, this proposed

exemption will be effective December

29, 1993.

Summary of Facts and Representations

1. TA is a Delaware corporation

involved in the venture capital industry

since 1968. TA has organized,

sponsored and/or managed 21 venture

capital funds, involving total capital

commitments of approximately $1.46

billion. The investors in the TA Funds

are primarily wealthy individuals and

sophisticated investors, including

employee benefit plans that are subject

to the Act, private foundations,

government plans, endowments and

other tax exempt organizations. The

applicant represents that venture capital

funds, such as the TA Funds, allow

Plans, particularly those having

significant asset bases, to achieve greater

diversification by asset class. As such,

many of the investors in existing TA

Funds and many potential investors in

future TA Funds will be Plan investors

that are covered by the Act. 2. Each TA Fund is organized and

operated so that the assets of such TA

Fund will not be deemed to be plan

assets under the Plan Asset Regulation.

In most cases, this results from the fact

that the TA Fund is operated in a

manner which causes such fund to

qualify as a venture capital operating

company.3 In some cases, it may be the

result of the fact that the equity

participation in the TA Fund by benefit

plan investors is not significant (i.e.,

more than 75 percent or more of the

equity interest in the entity is held by

non-benefit plan investors).4

3. The TA Funds have typically been

structured as limited partnerships with

TA serving as general partner and, in

some cases, having an interest as limited

partner. (TA Funds organized in the

future may be organized as limited

liability companies.) The TA Funds are

managed by TA which receives a prespecified management fee as well as a

pre-specified incentive allocation after

investors have received distributions in

excess of their capital contributions plus

a pre-specified minimum rate of return.

Because the TA Funds are expected to

be organized as venture capital

operating companies, the applicant

represents that none of the TA Funds

will hold ‘‘plan assets’’ and that the

compensation paid to TA by the TA

Funds will not be subject to the

prohibitions under the Act.5

TA’s most recent fund, Advent VII,

has aggregate capital commitments of

approximately $303 million from 83

individual and institutional investors.

Of the institutional investors, 14

investors are Plans that are covered

under the provisions of the Act. These

Plans have made a total capital

commitment to Advent VII of $95

million.

4. Each investor in a TA Fund,

including each Plan investor, enters into

a binding commitment to make capital

contributions to the TA Fund in an

amount specified by the investor.

Although an investor’s capital

commitments are not required to be

made at the outset, capital is drawn

down over time as the TA Fund

identifies and makes its venture capital

and other investments. Generally,

capital is called down in installments

ranging from 5 percent to 10 percent of

the total commitment. In most cases, all

of the capital commitments will have

been drawn down within 3 to 5 years of

the establishment of the TA Fund.

5. In recent years, the TA Funds have

expanded their focus to include a wide

variety of portfolio companies.6

Specifically, the TA Funds have

acquired, and expect to acquire,

interests in portfolio companies which

are involved, either directly or through

subsidiaries, in various aspects of the

financial services industry. TA believes

this broader scope is necessary to enable

the TA Funds to maximize investment

opportunities and investment returns. In

TA’s view, business opportunities can

arise in connection with start-up or

later-stage companies (including spinoffs and management buy-outs of

existing business operations) in
Federal Register / Vol. 62, No. 43 / Wednesday, March 5, 1997 / Notices 10077

7 In this regard, it is noted that the corresponding

section of the Code relating to disqualified persons

(see section 4975(e)(2) (H) and (I) does not contain

a similar provision which would make the owner

of 10 percent or more of a service provider a

disqualified person with respect to a Plan.

Nevertheless, because the service provider is a

disqualified person under section 4975(e)(2)(B) of

the Code, TA has requested that the exemption

extend to both the Code and the Act in order to

avoid any potential concerns regarding the

possibility of indirect prohibited transactions.

virtually any type of business rather

than exclusively in the hi-technology

area.

6. As part of this diversification trend,

TA Funds have been and will be

acquiring interests in portfolio

companies that are involved in

providing money management services,

brokerage services or other types of

services which may be utilized by Plans

and institutional investors. The

portfolio company may be, or may

become, a party in interest with respect

to one or more Plans which hold an

interest in the TA Fund when such

portfolio company, or any subsidiary

thereof performs services for a Plan. The

services may include fiduciary services

(e.g., management of assets of the Plan

other than those invested in a TA Fund).

In no event will the portfolio company

or its subsidiary act in a fiduciary

capacity with respect to the assets of the

Plan that are invested in the TA Fund.

If the TA Fund owns, directly or

indirectly, a 10 percent or more interest

in a service provider, TA notes that the

Fund will become a party in interest

with respect to such Plan under section

3(14) (H) and (I) of the Act.7 Since a TA

Fund frequently purchases a 10 percent

or more interest in a portfolio company,

TA represents that it is possible that a

TA Fund could become a 10 percent or

more owner of a service provider and a

party in interest with respect to each

Plan as to which the portfolio company

(or one of its subsidiaries) is a service

provider. Once a TA Fund becomes a

party in interest with respect to a Plan,

TA states that the Plan would be

prohibited from engaging in any

transaction with that TA Fund.

If a TA Fund were to become a party

in interest with respect to a Plan, TA is

concerned that a capital contribution

made by the Plan subsequent to the TA

Fund’s becoming a party in interest

would violate section 406(a)(1)(D) of the

Act notwithstanding the fact that the

capital contribution is being made

pursuant to a pre-existing binding

contractual commitment made by the

Plan at a time when the TA Fund was

not a party in interest. Therefore, to

resolve these potential technical

violations of the Act, TA has requested

an administrative exemption from the

Department.

7. If granted, the proposed exemption

will be effective December 29, 1993. On

that date, one of the TA Funds acquired

100 percent of the interest in a portfolio

company which owned or subsequently

acquired several investment managers.

At least one of the investment managers

provided services to a Plan that was also

an investor in the TA Fund. As a result,

TA believes that prohibited transactions

may have occurred when the Plan

subsequently funded its remaining

capital contributions to the TA Fund.

It is represented that the discovery of

the prohibited transactions was made by

TA and not by the investment manager.

The only role that the investment

manager played in these determinations

was its provision to TA of a list of

clients which enabled TA to compare

the investment manager’s clients with

the list of investors in the affected TA

Fund. It is represented that the

investment manager did not have any

responsibility with respect to the assets

of the Plan that were invested in the TA

Fund.

8. The requested exemption is subject

to a number of conditions that will

apply both retroactively and

prospectively. First, the TA Fund’s

party in interest status will, in all cases,

arise on the Determination Date, i.e.,

after the Plan has made a binding

commitment to invest in the TA Fund,

including its commitment to make

future capital contributions to the TA

Fund. Second, the decision to undertake

the obligation to make a binding

commitment must be made on behalf of

the Plan by a Plan fiduciary which is

independent of and unrelated to TA and

the portfolio company. Third, TA must

not otherwise provide investment

advice to the Plan within the meaning

of Regulation section 29 CFR 2510.3–

21(c) with respect to such Plan’s assets

that are invested in the TA Fund.

Fourth, at the Determination Date, the

Plan must have aggregate assets that are

in excess of $50 million. In the case of

multiple Plans which are invested

through a master or group trust in an

entity, the $50 million threshold will

apply to the aggregate assets of such

trust or entity. Fifth, as of the

Determination Date, the capital

commitment of the Plan (together with

the capital commitments of any other

Plans maintained by the same employer

or employee organization) with respect

to the TA Fund, must not exceed 15

percent of the total capital commitments

with respect to such TA Fund. Sixth, at

the Determination Date, the percentage

of the Plan’s assets committed to be

invested in the TA Fund must not

exceed 5 percent of the Plan’s total

assets. Seventh, at the Determination

Date, a Plan’s aggregate capital

commitment with respect to all TA

Funds must not exceed 25 percent of

such Plan’s total assets. TA represents

that the transaction which occurred on

December 29, 1993 met all of the

foregoing substantive conditions.

9. The conditions of the exemption

also require that each Plan receive the

following initial and ongoing written

disclosures from TA: (a) A copy of the

private placement memorandum

applicable to the TA Fund or another

comparable document containing

substantially the same information; (b) a

copy of the limited partnership or other

agreement establishing the TA Fund; (c)

a copy of the subscription agreement

applicable to the TA Fund, if any; (d)

copies of the proposed exemption and

grant notice related to the exemptive

relief described herein; and (e) periodic,

but no less frequently than annually,

reports relating to the overall financial

position and operational results of the

TA Fund including copies of the TA

Fund’s annual financial statements. In

addition, with respect to capital

contributions made to a TA Fund by a

Plan after the date of issuance of the

final exemption, TA will maintain or

cause to be maintained for a period of

six years from the date of each

transaction, records of each Plan

investing in a TA Fund and each

portfolio company comprising a TA

Fund. Such records will enable the

Department and other persons to

determine whether the terms and

conditions of the exemption are being

met.

10. If the exemption is not granted,

TA represents that it and the TA Funds

would be required to make one of

several adjustments designed to avoid

the prohibited transaction concern that

is the subject of this request. However,

TA states that it does not believe these

adjustments would be in the best

interest of existing or prospective Plan

investors. In this regard, TA represents

that it might attempt to avoid the

problem by not acquiring any portfolio

companies which are, directly or

indirectly, service providers to any of a

TA Fund’s Plan investors. However, TA

does not consider this alternative

satisfactory because it would limit the

TA Fund’s potential range of

investments and diminish the expected

investment return of such Fund.

Moreover, TA points out that a portfolio

company which is not a service

provider at the time of the TA Fund’s

investment might become a service

provider at some time in the future.

Under these circumstances, TA
10078 Federal Register / Vol. 62, No. 43 / Wednesday, March 5, 1997 / Notices

8PTE 84–14 permits various parties which are

related to employee benefit plans to engage in

transactions involving plan assets, if among other

conditions, the assets are managed by QPAMs (i.e.,

banks, savings and loan associations, insurance

companies or investment advisers registered under

the Investment Advisers Act of 1940), which are

independent of the parties in interest and meet

certain financial standards. PTE 96–23 permits

various transactions involving employee benefit

plans whose assets are managed by INHAMs and

party in interest service providers.

represents that it would be impractical

to restrict the activities of all portfolio

companies in which the TA Fund

invests to assure that no such portfolio

company would ever become a service

provider to any TA Fund’s Plan

investors. According to TA, such

restriction would be contrary to the best

interest of the TA Funds and their

investors, particularly, their Plan

investors.

As another alternative, TA represents

that it could limit the offering of

interests in the TA Funds to those Plans

which could take advantage of

Prohibited Transaction Exemption (PTE)

84–14 (49 FR 9494 March 13, 1984), the

Class Exemption for Plan Asset

Transactions Determined by

Independent Qualified Professional

Asset Managers (QPAMs) or PTE 96–23

(61 FR 15975, April 10, 1996), the Class

Exemption for Plan Asset Transactions

Determined by In-House Asset Managers

(INHAMs).8 However, TA believes that

such an approach would be unduly

restrictive and not in the best interest of

the Plans since relatively few Plans

could take advantage of PTE 96–23.

Also Plans would be forced to hire a

QPAM and incur an additional expense

in order to invest in a TA Fund if the

Plan’s named fiduciary would otherwise

make that decision itself.

11. In summary, it is represented that

the proposed exemption has satisfied or

will satisfy the statutory conditions for

an exemption under section 408(a) of

the Act because: (a) At the

Determination Date, the TA Fund’s

party in interest status has or will, in all

cases, arise after the Plan has made its

binding commitment to invest in the TA

Fund, including its commitment to

make future capital contributions to the

TA Fund; (b) the decision by a Plan to

make capital contributions to the TA

Fund has been and will be made on

behalf of the Plan by a Plan fiduciary

which is independent of and unrelated

to TA and the portfolio company that is

acquired by the TA Fund; (c) TA will

not otherwise provide investment

advice to the Plan within the meaning

of 29 CFR 2510.3–21(c) of the Act with

respect to such Plan’s assets that are

invested in the TA Fund; (d) as of the

Determination Date, the capital

commitment of the Plan (together with

the capital commitment of any other

related Plans maintained by the same

employer or employee organization) has

not and will not exceed more than 15

percent of the total outstanding capital

commitments with respect to the TA

Fund; (d) at the Determination Date, the

percentage of the Plan’s assets

committed to be invested in the TA

Fund does not and will not exceed 5

percent of the Plan’s total assets and the

Plan’s aggregate commitment to all TA

Funds has not and will not exceed 25

percent of the Plan’s total assets; (e) a

Plan investing in a TA Fund has or will

have assets that are in excess of $50

million; and (f) TA has or will make

written disclosures to the Plan regarding

the TA Fund both at the time of the

initial commitment to invest in such

Fund as well as on an ongoing basis.

Notice to Interested Persons

Those persons who may be interested

in the pendency of the requested

exemption include fiduciaries of Plans

whose assets are currently invested in a

TA Fund. Accordingly, the Department

has determined that the only practical

form of providing notice to such Plan

fiduciaries is the distribution, by TA, of

a copy of the proposed exemption by

first class mail within 30 days of the

date of publication of the pendency

notice in the Federal Register. The

notice will include a copy of the notice

of proposed exemption, as published in

the Federal Register, as well as a

supplemental statement, as required,

pursuant to 29 CFR 2570.43(b)(2), which

shall inform interested persons of their

right to comment on the pending

exemption. Comments with respect to

the proposed exemption are due 60 days

after the date of publication of the

proposed exemption in the Federal

Register.

FOR FURTHER INFORMATION CONTACT: Ms.

Jan D. Broady 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 believe a

fiduciary or other party in interest of

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 of the

plan;

(3) The proposed exemptions, if

granted, will be supplemental to, and

not in derogation of, any other

provisions of the Act and/or the Code,

including statutory or administrative

exemptions and transitional rules.

Furthermore, the fact that a transaction

is subject to an administrative or

statutory exemption is not dispositive of

whether the transaction is in fact a

prohibited transaction; and

(4) The proposed exemptions, if

granted, will be subject to the express

condition that the material facts and

representations contained in each

application are true and complete and

accurately describe all material terms of

the transaction which is the subject of

the exemption. In the case of continuing

exemption transactions, if any of the

material facts or representations

described in the application change

after the exemption is granted, the

exemption will cease to apply as of the

date of such change. In the event of any

such change, application for a new

exemption may be made to the

Department.

Signed at Washington, DC, this 28th day of

February 1997.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 97–5430 Filed 3–4–97; 8:45 am]

BILLING CODE 4510–29–M

[Prohibited Transaction Exemption 97–15;

Exemption Application No. D–10172, et al.]

Grant of Individual Exemptions; The

Chicago Corporation (TCC), et al.

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Grant of individual exemptions.

SUMMARY: This document contains

exemptions issued by the Department of

Labor (the Department) from certain of