Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 / Notices 19955

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Prohibited Transaction Exemption 98–17;

Exemption Application No. D–10412, et al.]

Grant of Individual Exemptions;

Metropolitan Life Insurance Company

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

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).

Notices were published in the Federal

Register of the pendency before the

Department of proposals to grant such

exemptions. The notices set forth a

summary of facts and representations

contained in each application for

exemption and referred interested

persons to the respective applications

for a complete statement of the facts and

representations. The applications have

been available for public inspection at

the Department in Washington, D.C. The

notices also invited interested persons

to submit comments on the requested

exemptions to the Department. In

addition the notices stated that any

interested person might submit a

written request that a public hearing be

held (where appropriate). The

applicants have represented that they

have complied with the requirements of

the notification to interested persons.

No public comments and no requests for

a hearing, unless otherwise stated, were

received by the Department.

The notices of proposed exemption

were issued and the exemptions are

being granted solely by the Department

because, 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 proposed to the

Secretary of Labor.

Statutory Findings

In accordance with section 408(a) of

the Act and/or section 4975(c)(2) of the

Code and the procedures set forth in 29

CFR Part 2570, Subpart B (55 FR 32836,

32847, August 10, 1990) and based upon

the entire record, the Department makes

the following findings:

(a) The exemptions are

administratively feasible;

(b) They are in the interests of the

plans and their participants and

beneficiaries; and

(c) They are protective of the rights of

the participants and beneficiaries of the

plans.

Metropolitan Life Insurance Company

(MetLife) Located in New York, NY

[Prohibited Transaction Exemption 98–

17; Exemption Application No. D–

10412]

Exemption

Section I. Covered Transactions

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, shall not apply, effective April

1, 1997, to (1) the purchase or retention

by an employee benefit plan (the Plan);

and (2) the sale or continuation by

MetLife or an affiliate (collectively,

MetLife) of a synthetic guaranteed

investment contract (the MetLife Trust

GIC) entered into between the Plan and

MetLife under which MetLife

guarantees (the Guarantee) certain

amounts (the Guaranteed Value).

This exemption is conditioned upon

the following requirements as set forth

below in Section II.

Section II. General Conditions

(a) The decision to enter into a

MetLife Trust GIC is made on behalf of

a participating Plan in writing by a

fiduciary of such Plan which is

independent of MetLife.

(b) Only Plans with total assets having

an aggregate market value of at least $25

million are permitted to purchase

MetLife Trust GICs; provided however

that—

(1) In the case of two or more Plans

which are maintained by the same

employer, controlled group of

corporations or employee organization

(the Related Plans), whose assets are

commingled for investment purposes in

a single master trust or any other entity

the assets of which are ‘‘plan assets’’

under 29 CFR 2510.3–101 (the Plan

Asset Regulation), which entity has

purchased a MetLife Trust GIC, the

foregoing $25 million requirement is

deemed satisfied if such trust or other

entity has aggregate assets which are in

excess of $25 million; provided that, if

the fiduciary responsible for making the

investment decision on behalf of such

master trust or other entity is not the

employer or an affiliate of the employer,

such fiduciary has total assets under its

management and control, exclusive of

the $25 million threshold amount

attributable to plan investment in the

commingled entity, which are in excess

of $50 million, or

(2) In the case of two or more Plans

which are not maintained by the same

employer, controlled group of

corporations or employee organization

(the Unrelated Plans), whose assets are

commingled for investment purposes in

a group trust or any other form of entity

the assets of which are ‘‘plan assets’’

under the Plan Asset Regulation, which

entity has purchased a MetLife Trust

GIC, the foregoing $25 million

requirement is deemed satisfied if such

trust or other entity has aggregate assets

which are in excess of $25 million;

provided that the fiduciary responsible

for making the investment decision on

behalf of such group trust or other

entity—

(i) Is neither the sponsoring employer,

a member of the controlled group of

corporations, the employee

organization, nor an affiliate,

(ii) Has full investment responsibility

with respect to Plan assets invested

therein, and

(iii) Has total assets under its

management and control, exclusive of

the $25 million threshold amount

attributable to Plan investment in the

commingled entity, which are in excess

of $50 million.

(c) Prior to the execution of the

MetLife Trust GIC, the Plan fiduciary

receives a full and detailed written

disclosure of all material features

concerning the MetLife Trust GIC,

including—

(1) A Letter of Agreement between

MetLife and the Plan fiduciary which

stipulates the relevant provisions of the

GIC, the applicable fees and the rights

and obligations of the parties;

(2) Investment Guidelines defining

the manner in which an investment

manager will manage a MetLife Trust

GIC;

(3) A copy of the Investment

Management Agreement between

MetLife and the Plan fiduciary;

(4) Information explaining in a

manner calculated to be understood by

a Plan fiduciary that, if a MetLife

affiliated manager underperforms or if

adverse market conditions occur, the

interest rate that is credited (the

Credited Rate) to a MetLife Trust GIC

account (the Account) may be as low as

0 percent;

(5) The pertinent features of a MetLife

conventional GIC (the MetLife

Conventional GIC) that a Plan fiduciary

may obtain upon the discontinuance of

a MetLife Trust GIC, including an

explanation that, although a MetLife

Conventional GIC will offer a guarantee

of principal, it may have a credited rate
19956 Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 / Notices

1MetLife represents that in instances of a startup situation, a Plan might not have assets totaling

$25 million. Nevertheless, MetLife explains that it

would still allow the Plan to invest in a MetLife

Trust GIC as long as the Plan reached the $25

million threshold within the year.

as low as 0 percent for the duration of

the contract; and

(6) Copies of the proposed exemption

and grant notice with respect to the

exemptive relief provided herein.

(d) Upon the selection by a Plan

fiduciary of a MetLife Trust GIC, a

participant in a Plan that provides for

participant investment selection (the

Section 404(c) Plan) is given a summary

of the pertinent features of the

documents listed above in paragraphs

(c)(1), (c)(2) and (c)(5) of this Section II,

which are deemed appropriate for

distribution to such participant,

including a disclosure that the MetLife

Trust GIC may have a Credited Rate as

low as 0 percent.

(e) Subsequent to a Plan’s investment

in a MetLife Trust GIC, the Plan

fiduciary and, if applicable, the Plan

participant, upon such participant’s

request, receive the following ongoing

disclosures regarding such investment:

(1) A monthly report consisting of a

Guaranteed Value Statement, which

specifies the affected Plan’s MetLife

Trust GIC balance for the prior month,

contributions, withdrawals, transfers,

interest earned, the current month’s

ending balance for the MetLife Trust

GIC, the current interest rate and a

summary of transactions;

(2) A quarterly report consisting of a

Market Value Statement, which

specifies the prior quarter’s ending

market value for a Plan’s MetLife Trust

GIC, contributions, withdrawals, the

fees paid to MetLife, investment

income, realized capital gains and/or

losses from sales, changes in unrealized

appreciation of assets, the current

quarter’s ending market value and rate

of return, and a summary of

transactions; and

(3) An annual portfolio listing or letter

describing key events, depending upon

its arrangements with a Plan fiduciary.

(f) As to each Plan, the combined total

of all fees and charges imposed under a

MetLife Trust GIC is not in excess of

‘‘reasonable compensation’’ within the

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

(g) Each MetLife Trust GIC

specifically provides an objective

method for determining the fair market

value of the securities owned by the

Plan pursuant to such GIC.

(h) Each MetLife Trust GIC has a

predefined maturity date or dates

selected by the Plan fiduciary and

agreed to by MetLife. However, in no

event does a MetLife Trust GIC have a

maturity date exceeding five years. A

Plan fiduciary may extend the maturity

date for an additional year upon an

affirmative written decision made

annually by such fiduciary. Once a Plan

fiduciary does not affirmatively extend

the maturity date, no future extensions

will occur.

(i) Prior to a Plan fiduciary’s decision

regarding the extension of a maturity

date for a MetLife Trust GIC for one

additional year, MetLife informs such

Plan fiduciary of the new reset rate for

the Credited Rate.

(j) MetLife maintains books and

records of each MetLife Trust GIC

transaction for a period of six years.

Such books and records are subject to

annual audit by independent, certified

public accountants.

EFFECTIVE DATE: If granted, this

exemption is effective as of April 1,

1996.

For a more complete statement of the

facts and representations supporting the

Department’s decision to grant this

exemption, refer to the notice of

proposed exemption (the Notice)

published on October 20, 1997 at 62 FR

54471.

Written comments

The Department received one written

comment with respect to the Notice and

no requests for a public hearing. The

comment, which was submitted by

MetLife, suggested modifications to the

operative language of the Notice and

recommended certain changes to the

Summary of Facts and Representations

(the Summary) of the Notice. Presented

below are the modifications requested

by MetLife and the Department’s

accompanying responses. Also

presented are amendments to the Notice

made by the Department.

1. Operative Language Changes

a. Exemptive Language

MetLife notes that under the caption

‘‘Proposed Exemption,’’ the exemptive

language of the Notice does not provide

exemptive relief for any payment by

MetLife to a Plan pursuant to MetLife’s

Guarantee. Because a Plan would be

required to receive payment under a

MetLife Trust GIC arrangement if certain

conditions are met, MetLife assumes the

Department would consider such

payment as part of the exempted

arrangement.

The Department agrees that the

payment by MetLife to a Plan pursuant

to the Guarantee is subsumed under the

transactions exempted. Therefore, the

Department does not believe any

modification to the exemptive language

is warranted.

b. Condition (b)

Condition (b) of the Notice requires a

Plan investing in a MetLife Trust GIC to

have assets that are in excess of $25

million.1 MetLife states that in some

situations, a Plan fiduciary may act on

behalf of a trust in which a number of

Plans participate. Although the trust

may have assets in excess of $25

million, MetLife indicates that the

individual Plans may not have total

assets which would satisfy the

minimum threshold amount.

Therefore, MetLife requests that the

Department clarify that the scope of the

Notice be expanded to include a

fiduciary (e.g., an independent

investment manager) acting on behalf of

a trust with assets in excess of $25

million regardless of the asset totals of

the individual Plans participating in the

trust. In MetLife’s view, such trust

fiduciary would have the same level of

sophistication as a fiduciary of a Plan

with assets in excess of $25 million. If

this change is made, MetLife also

requests that various references in the

Notice to Plan sponsors should be

construed to include fiduciaries of trusts

and references to Plans should be

construed to include trusts.

In response to these comments, the

Department acknowledges that the use

of the term ‘‘Plan’’ in the Notice should

be construed to include trusts and other

commingled investment vehicles which

have assets (either individually or

aggregated within the investment

vehicle) in excess of $25 million.

Further, the term ‘‘Plan fiduciaries’’ and

‘‘Plan sponsors’’ should be construed to

include fiduciaries of such trusts or

commingled investment vehicles.

In addition, in recognition of the fact

that individual Plans investing in a

commingled entity may not be able to

meet the $25 million threshold amount

on their own in order to acquire a

MetLife Trust GIC, the Department has

decided to permit the aggregation of

Plan assets within the pooled vehicle in

order to satisfy the threshold amount.

However, to ensure the sophistication of

the fiduciary who is making the

decision on behalf of Plans to invest in

a MetLife Trust GIC, the Department has

imposed certain additional

requirements for pooled arrangements

involving the assets of either related

Plans (i.e., the Related Plans) or

unrelated Plans (i.e., the Unrelated

Plans). These additional requirements

are described as follows:

(1) Related Plans. With respect to two

or more plans, which are maintained by

the same employer, controlled group of

corporations or employee organization,
Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 / Notices 19957

2For purposes of this exemption, the term ‘‘full

investment responsibility’’ means that the fiduciary

responsible for making the investment decision has

and exercises discretionary management authority

over all of the assets of the group trust or other plan

assets look-through entity. 3 29 CFR 2550.404(c)–1.

whose assets are invested in a master

trust or any other form of plan asset

look-through entity, which entity has

purchased a MetLife Trust GIC from

MetLife, the Department notes that the

$25 million threshold may be satisfied

by aggregating the assets of the investing

Plans within the pooled vehicle. In this

regard, the Department also notes that

an employer may retain an independent

investment manager to manage all or a

portion of plan assets invested in a

master trust. Under these circumstances,

the fiduciary must have total assets

under its management and control,

exclusive of the $25 million threshold

amount attributable to plan investment

in the commingled entity, which are in

excess of $50 million.

(2) Unrelated Plans. For two or more

plans which are not maintained by the

same employer, controlled group of

corporations or employee organization,

whose assets are invested in a group

trust or other plan asset look-through

entity, which entity has purchased a

MetLife Trust GIC, the $25 million

threshold will apply to the aggregate

assets of such entity so long as the

fiduciary responsible for making the

investment decision on behalf of the

group trust or other plan asset lookthrough entity is not the sponsoring

employer, a member of the controlled

group of corporations, the employee

organization, or an affiliate, and such

fiduciary has full investment

responsibility 2 with respect to the plan

assets invested therein. Also, the

fiduciary must have total assets under

its management and control, exclusive

of the $25 million threshold amount

attributable to plan investment in the

commingled entity, which are in excess

of $50 million.

Accordingly, Condition (b) of Section

II has been revised to read as follows:

‘‘(b) Only Plans with total assets having an

aggregate market value of at least $25 million

are permitted to purchase MetLife Trust

GICs; provided however that—

(1) In the case of two or more Plans which

are maintained by the same employer,

controlled group of corporations or employee

organization (the Related Plans), whose

assets are commingled for investment

purposes in a single master trust or any other

entity the assets of which are ‘‘plan assets’’

under 29 CFR 2510.3–101 (the Plan Asset

Regulation), which entity has purchased a

MetLife Trust GIC, the foregoing $25 million

requirement is deemed satisfied if such trust

or other entity has aggregate assets which are

in excess of $25 million; provided that, if the

fiduciary responsible for making the

investment decision on behalf of such master

trust or other entity is not the employer or

an affiliate of the employer, such fiduciary

has total assets under its management and

control, exclusive of the $25 million

threshold amount attributable to plan

investment in the commingled entity, which

are in excess of $50 million, or

(2) In the case of two or more Plans which

are not maintained by the same employer,

controlled group of corporations or employee

organization (the Unrelated Plans), whose

assets are commingled for investment

purposes in a group trust or any other form

of entity the assets of which are ‘‘plan assets’’

under the Plan Asset Regulation, which

entity has purchased a MetLife Trust GIC, the

foregoing $25 million requirement is deemed

satisfied if such trust or other entity has

aggregate assets which are in excess of $25

million; provided that the fiduciary

responsible for making the investment

decision on behalf of such group trust or

other entity—

(i) Is neither the sponsoring employer, a

member of the controlled group of

corporations, the employee organization, nor

an affiliate,

(ii) Has full investment responsibility

with respect to Plan assets invested

therein, and

(iii) Has total assets under its management

and control, exclusive of the $25 million

threshold amount attributable to Plan

investment in the commingled entity, which

are in excess of $50 million.’’

c. Conditions (d) and (e)

MetLife believes the disclosure

requirements in the Notice for

participants in Section 404(c) Plans go

beyond the scope of the disclosure

requirements of section 404(c) of the Act

and the Department’s accompanying

regulation (the Section 404(c)

Regulation).3 MetLife explains that

funding vehicles, such as the MetLife

Trust GIC, are typically part of a Plan’s

larger ‘‘stable value’’ or ‘‘fixed income’’

funding option. MetLife believes that to

mandate disclosure for one funding

vehicle within a Plan’s stable value

portfolio may create an administrative

hardship for a Plan fiduciary as well as

present a competitive barrier for

MetLife.

As an alternative, MetLife suggests

that the existing provisions of the

Section 404(c) Regulation govern the

disclosure provided or made available

to a Section 404(c) Plan if a MetLife GIC

Trust is included in the Plan’s offerings.

According to MetLife, under the Section

404(c) Regulation, participants must be

provided with descriptions of each

designated investment alternative but

not with descriptions of separate

investments forming a part of the

investment alternative. The documents

a participant may obtain upon request

pursuant to section 2550.404c–

1(b)(2)(i)(B)(2)(ii) of the Section 404(c)

Regulation include financial statements

and reports and any other materials

relating to investment alternatives

available under the Plan to the extent

provided to the Plan. MetLife further

explains that the Section 404(c)

Regulation imposes no additional

obligation on the administrator to

furnish or make available materials

relating to the companies in which the

equity fund invests. Therefore, MetLife

wishes to have the Notice amended to

state that the disclosure required for

participants in a Section 404(c) Plan

which offers a MetLife Trust GIC as an

investment option, particularly where

the MetLife Trust GIC is one of a

number of contracts within a designated

investment alternative, is that required

by the Section 404(c) Regulation and

other existing regulations.

The Department notes that when an

investment option, such as a MetLife

Trust GIC, is offered by a fiduciary

under a Section 404(c) Plan to

participants as part of the Plan’s stable

value portfolio and a party in interest to

an investing Plan is providing the

investment, the acquisition of the

contract by the plan fiduciary is beyond

the scope of the Section 404(c)

Regulation. In providing exemption

relief for this type of transaction in a

participant-directed plan, the

Department typically requires, among

other things, that the Plan fiduciary

provide the participant with full and

complete disclosures regarding the

nature of the investment. These

disclosures will ensure that the

directing Plan participant has given

informed consent to the investment and

continues to be apprised about the

ramifications of the investment.

After considering MetLife’s comment,

the Department has decided that a

Section 404(c) Plan participant should,

at a minimum, receive from the

appropriate fiduciary, summaries of the

pertinent features of: the Letter of

Agreement between MetLife and the

Plan fiduciary, particularly the

disclosure that the MetLife Trust GIC

may have a Credited Rate as low as 0

percent; the Investment Guidelines and

the MetLife Conventional GIC. However,

the Department has decided to delete

paragraphs (2) and (3) of Condition (d)

of the proposal relating to disclosure of

the operative language of the proposed

and/or final exemptions. Therefore,

Condition (d), which has been

redesignated herein as Section II(d), has

been revised to read as follows:
19958 Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 / Notices

4Paragraphs (c)(1), (c)(2) and (c)(5) of Section II

pertain to the Letter of Agreement, the Investment

Guidelines and the pertinent features of the MetLife

Conventional GIC.

(d) Upon the selection by a Plan fiduciary

of a MetLife Trust GIC, a participant in a Plan

that provides for participant investment

selection (the Section 404(c) Plan) is given a

summary of the pertinent features of the

documents listed above in paragraphs (c)(1),

(c)(2) and (c)(5) of this Section II, which are

deemed appropriate for distribution to such

participant, including a disclosure that the

MetLife Trust GIC may have a Credited Rate

as low as 0 percent.4

Condition (e) of the Notice pertains to

ongoing disclosures that will be

provided to a Plan fiduciary and, if

applicable, Plan participants in a

Section 404(c) Plan subsequent to a

Plan’s investment in a MetLife Trust

GIC. Such written disclosures include

monthly, quarterly, or annual reports.

These documents may also be made

available to a Plan participant upon

such participant’s request.

However, after careful consideration

of MetLife’s comment, the Department

has decided not to modify Condition (e).

The Department believes that the

condition, as proposed, provides

flexibility to the Plan fiduciary by not

requiring that mandatory disclosures

automatically be provided to each

participant. Rather, the participant may

obtain copies of such reports at his or

her request.

d. Condition (h)

Condition (h) of the Notice provides

that each MetLife Trust GIC will have a

predefined maturity date or dates

selected by a Plan fiduciary and agreed

to by MetLife. Upon further

consideration of Condition (h), the

Department believes it is appropriate to

restrict the maximum number of years

that a MetLife Trust GIC may remain in

effect before the Plan can realize the

Guaranteed Value. Therefore, MetLife

has agreed to cap the maturity date for

a MetLife Trust GIC at five years. This,

together with the ability of a fiduciary

to annually affirmatively extend the

maturity date for an additional year,

should ensure that the Plan will have

greater investment flexibility and will

enable the utilization of third-party

benchmark indices having 4–6 year

durations. (For a discussion of the

revised procedure for extending or

locking in the maturity date for a

MetLife Trust GIC under Condition (h),

see Part 2.c. below of this grant notice).

Thus, based upon the foregoing, the

Department has revised Condition (h) of

the Notice as follows:

(h) Each MetLife Trust GIC has a

predefined maturity date or dates selected by

the Plan fiduciary and agreed to by MetLife.

However, in no event does a MetLife Trust

GIC have a maturity date exceeding five

years. A Plan fiduciary may extend the

maturity date for an additional year upon an

affirmative written decision made annually

by such fiduciary. Once a Plan fiduciary does

not affirmatively extend the maturity date, no

future extensions will occur.

e. Condition (i)

Condition (i) of the Notice states that

MetLife will inform a Plan fiduciary of

the new reset rate for the Credited Rate

prior to the fiduciary’s affirmation of the

maturity date. To reflect the fact that

MetLife will inform a Plan fiduciary of

the new reset rate for the Credited Rate

prior to a Plan fiduciary’s decision to

extend a maturity date for a MetLife

Trust GIC for one year or to decline such

extension, the Department has revised

Condition (i).

(i) Prior to a Plan fiduciary’s decision

regarding the extension of a maturity date for

a MetLife Trust GIC for one additional year,

MetLife informs such Plan fiduciary of the

new reset rate for the Credited Rate.

2. Changes to the Summary

With the exception of MetLife’s

suggested change to the Credited Rate

formula, which is discussed below in

Part 2.b., the Department has made the

following substantive modifications to

the Summary.

a. Representation 7

MetLife states a possible

interpretation of the language of

Representation 7 would not allow for

the designation of an investment

manager other than MetLife or an

affiliated sub-manager other than State

Street Research and Management

Company (State Street Research).

Because MetLife wishes to be able to

designate other investment managers

and affiliated sub-managers by mutual

agreement with the Plan sponsor, even

though there is presently no affiliate to

designate as a sub-manager, MetLife

requests that the second sentence in

Representation 7 be redrafted as follows:

However, by mutual agreement with the

Plan sponsor, MetLife may designate State

Street Research or another affiliated

investment manager as investment manager

or sub-manager with respect to some or all

of the assets in an Account.

In addition, in the third sentence of

Representation 7, MetLife requests that

the words ‘‘investment manager or’’ be

inserted before the word ‘‘submanager.’’

b. Representation 12

MetLife requests that certain technical

changes be made to the description of

the Credited Rate because it believes the

references to the duration and yield-tomaturity in the text imply that the

source for these two inputs is the

Account rather than a third-party

benchmark index. Therefore, MetLife

requests that in part (a) of the second

sentence of the first paragraph of

Representation 12, the words ‘‘of assets

in the Account’’ be deleted and the

following paragraphs be inserted after

part (c) of the representation:

If a Plan fiduciary has determined to

extend a maturity date (as described in

Representation 13), the Yield-to-Maturity

component will be the yield-to-maturity of an

external index (as described in

Representation 8) unless specifically

requested by the Plan with MetLife’s consent.

MetLife represents that it will not calculate

the yield-to-maturity of the index. Rather,

such calculation will be made by the index

provider. Once a Plan fiduciary has

determined not to extend a maturity date, the

Yield-to-Maturity component will be the

yield of a Treasury security with a

comparable duration relative to the assets in

the Account.

The Credited Rate will not be affected by

the length of time that MetLife has managed

a MetLife Trust GIC Account.

In addition, MetLife requests that the

last sentence of the second paragraph of

Representation 12 be deleted and

replaced with the following language:

The amortization period or Duration will

be no longer than the period specified in the

MetLife Trust GIC. If a Plan fiduciary has

determined to extend a maturity date (as

described in Representation 13), it typically

will be the duration of the index (as

described in Representation 8) unless

specifically requested by the Plan with

MetLife’s consent. MetLife further represents

that the duration of the index will be

calculated by the index provider. Once a Plan

has determined not to extend a maturity date,

the Duration is the period from the effective

date of the Credited Rate reset until the

maturity date or the average maturity date.

c. Representation 13

Representation 13 of the Summary

describes the manner in which the

maturity date mechanism for a MetLife

Trust GIC will operate. Under the

procedure set forth in Representation

13, a MetLife Trust GIC may continue

indefinitely since there are no

restrictions placed on the number of

years the instrument may remain in

effect. Also, during an annual

notification period, MetLife is required

to afford the Plan fiduciary an

opportunity to ‘‘affirm’’ the maturity

date in writing. If the Plan fiduciary

does nothing, the MetLife Trust GIC will

continue for another year and the

notification procedure will be repeated

each year. Assuming, however, the Plan

fiduciary ‘‘affirms’’ the maturity date,

the MetLife Trust GIC will mature
Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 / Notices 19959

9MetLife notes that the procedures governing the

maturity date of a MetLife Trust GIC will not affect

the ability of a Plan fiduciary to discontinue such

investment as described in Representation 19.’’

within the prescribed time frame

selected by the Plan fiduciary from the

anniversary date of such MetLife Trust

GIC.

In order to provide additional

safeguards, the Department has decided

to revise this procedure in its entirety.

Specifically, the Department has

proposed that the Plan fiduciary make

an affirmative decision to extend the

maturity date for a MetLife Trust GIC.

Additionally, the Department has

determined that a MetLife Trust GIC

will never have a maturity date that is

in excess of five years. A MetLife Trust

GIC may be extended, however, on an

annual basis, for only one year as long

as the Plan fiduciary provides advance

written notice to MetLife agreeing to the

extension. If, however, the Plan

fiduciary does not inform MetLife, in

writing, prior to the anniversary date of

the intention to extend the maturity

date, the date will not be extended by

one year and the MetLife Trust GIC will

mature within the maximum five year

time frame. As noted above, MetLife

will repeat the notification procedure

over successive annual periods if the

Plan fiduciary determines that each

such extension is appropriate. Should

the Plan fiduciary decide not to extend

the maturity date on an anniversary

date, no further annual notifications

will be required of MetLife.

Besides the foregoing changes, the

Department emphasizes the fact that the

Guaranteed Value for a MetLife Trust

GIC will not always reflect the amount

of the initial contribution but may be

adjusted for contributions and

withdrawals.

Therefore, Representation 13 has been

revised to read as follows:

13. Although each MetLife Trust GIC will

have a defined maturity date or dates

selected by the Plan fiduciary and agreed to

by MetLife, in no event will a MetLife Trust

GIC have a maturity date exceeding five

years. However, such date may be extended

if specifically requested, in writing, by the

Plan fiduciary. Each such extension of the

maturity date will be subject to a one year

limitation as described below.

One month before the anniversary date of

the MetLife Trust GIC, MetLife will notify the

Plan fiduciary, in writing, of the impending

anniversary of such MetLife Trust GIC, as

well as the new reset rate for the Credited

Rate, and afford the fiduciary the opportunity

to notify MetLife that it will extend the

maturity date. If the Plan fiduciary does not

inform MetLife, in writing, prior to the

anniversary date of the intention to extend

the maturity date, the date will not be

extended by one year and the original

maturity date will remain in effect. If, on the

other hand, the Plan fiduciary informs

MetLife, in writing, prior to the anniversary

date of the intention to extend the maturity

date, the date will be extended for one

additional year only. A Plan fiduciary which

elects to extend the maturity date in this

manner will be given another opportunity to

do so one month before the next anniversary

date of the MetLife Trust GIC.

The notification procedure will be

repeated, and the opportunity to extend the

maturity date for one more year will be given

prior to each subsequent anniversary date,

provided the fiduciary has elected to extend

the maturity date before the immediately

preceding anniversary date. Each extension

elected by the fiduciary will be for only one

year beyond the maturity date, including any

extensions previously in effect. Thus, at no

time will a MetLife Trust GIC have a maturity

date that is more than five years from the

anniversary date.

Upon the maturity of a MetLife Trust GIC,

MetLife represents that if the Market Value

of the assets invested in the MetLife Trust

GIC is less than the Guaranteed Value (as

described in Representation 11), it will make

up the difference.9

d. Representation 20(b). MetLife

represents that although the conversion

of a MetLife Trust GIC to a MetLife

Conventional GIC has been discussed

with the Department primarily in the

context of Guaranteed Value exceeding

Market Value, it wishes to clarify that

the MetLife Conventional GIC may still

be selected regardless of the relative

levels of Guaranteed and Market Values.

In some cases, MetLife notes that a Plan

fiduciary holding a MetLife Trust GIC

with Market Value in excess of

Guaranteed Value may consider the

MetLife Conventional GIC the most

prudent alternative available. If this

fiduciary believes that interest rates are

about to decline, such fiduciary may

decide to lock in the gain by selecting

this investment option. Because ‘‘any

market value loss or gain * * * will be

amortized over the period ending with

the final maturity date of the MetLife

Conventional GIC,’’ MetLife explains

that the Plan fiduciary will have secured

an above market rate of return

guaranteed for an extended fixed period.

Therefore, to cover the full range of

situations in which a MetLife

Conventional GIC will be offered,

MetLife requests that the words ‘‘at a

time when there are losses and’’ be

deleted in the first sentence of

Representation 20(b). Similarly, and for

clarification, MetLife requests that the

following sentence be substituted for the

first sentence of Footnote 16:

The Department notes that the decision by

a Plan fiduciary to convert a MetLife Trust

GIC into a MetLife Conventional GIC is

subject to the provisions of section 404 of the

Act, as are all Plan investment decisions.

Finally, the Department notes that

MetLife’s comments with respect to the

Notice also contained certain minor

clarifications to information included in

the Summary. Rather than restate these

modifications in this grant notice, the

Department wishes to acknowledge all

of the technical clarifications made by

MetLife to the information in question.

For further information regarding

MetLife’s comment letter or other

matters discussed herein, interested

persons are encouraged to obtain copies

of the two exemption application files

(Exemption Application No. D–10241

and Exemption Application No. D–

10412) the Department is maintaining in

this case. The complete application

files, as well as all supplemental

submissions received by the

Department, are made available for

public inspection in the Public

Documents Room of the Pension and

Welfare Benefits Administration, Room

N–5638, U.S. Department of Labor, 200

Constitution Avenue, N.W.,

Washington, D.C. 20210.

Accordingly, after consideration of

the entire record, including MetLife’s

comment letter, the Department has

determined to grant the exemption as

modified herein.

FOR FURTHER INFORMATION CONTACT: Ms.

Jan D. Broady of the Department,

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

a toll-free number.)

Consolidated Associations of Railroad

Employees Health Care Plan (the Plan)

Located in Topeka, Kansas

[Prohibited Transaction Exemption 98–

18; Exemption Application No. L–

10527]

Exemption

The restrictions of section 406(a) of

the Act shall not apply, effective June

10, 1997 to: (1) the current leasing (the

Lease) of certain real property (the

Property) by the Plan to Century Health

Solutions, Inc. (Century), a party in

interest with respect to the Plan; (2) the

proposed new leasing of substantially

the same Property by the Plan to

Century (or its successor in name)

effective April 1, 1998 (the New Lease);

and (3) the possible future sale of the

Property by the Plan to Century (or its

successor in name) pursuant to a right

of first refusal under the terms of the

Lease, provided the following

conditions are satisfied: (a) the Property

represents no more than 25% of the

value of the Plan’s assets; (b) the terms

of the Lease are, and will remain, at

least as favorable to the Plan as those

obtainable in an arm’s-length

transaction with an unrelated party; (c)

the fair market rental value is
19960 Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 / Notices

determined on an annual basis by a

qualified, independent appraiser; (d) the

Plan’s independent fiduciary has

determined that the transaction is

appropriate for the Plan and in the best

interests of the Plan’s participants and

beneficiaries; (e) the Plan’s independent

fiduciary will continue to monitor the

transaction and the conditions of the

exemption and take whatever action is

necessary to enforce the Plan’s rights

under the Lease; and (f) the Plan’s

independent fiduciary acts to ensure

that any sale of the Property by the Plan

to Century is properly effected under

the terms of the Lease, pursuant to

Century’s right of first refusal in the

event the Plan receives a bona fide offer

from a third party to purchase the

Property, and Century is not in default

on any of its obligations under the

Lease.

For a more complete statement of the

facts and representations supporting the

Department’s decision to grant this

exemption, refer to the notice of

proposed exemption published on

February 26, 1998 at 63 FR 9867.

Written Comments

The only written comments received

by the Department with respect to the

proposed exemption were submitted by

the applicant, which sought clarification

with respect to two points. First, the

applicant represented that the New

Lease would likely be for fewer square

feet of the Property than under the

Lease, and sought clarification that the

exemption as proposed would still

apply to the New Lease. With respect to

the New Lease, the Department notes

that the exemption would apply to a

lease of fewer square feet in the same

Property provided all conditions of the

exemption are satisfied. Secondly, the

applicant requested clarification that the

exemption would still apply if Century

reorganized as a for-profit corporation,

or changed its name, or both. The

applicant represented that this change

in name will never occur in connection

with a sale of the underlying assets of

Century to an unrelated third party. The

applicant requested that the operative

language of the exemption be modified

to extend relief to Century or its

successor in name. The operative

language of the exemption has been

amended accordingly to reflect the

possible name change.

The Department has considered the

entire record, including the comment

submitted by the applicant, and has

determined to grant the exemption as

proposed, with the one change as

described above.

EFFECTIVE DATE: This exemption is

effective June 10, 1997.

FOR FURTHER INFORMATION CONTACT: Gary

H. Lefkowitz of the Department,

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

a toll-free number.)

Thornton, Hegg, Reif, Johnston & Dolan

Profit Sharing Plan and Trust (the Plan)

Located in Alexandria, Minnesota

[Prohibited Transaction Exemption No.

98–19; Application No. D–10563]

Exemption

The restrictions of sections 406(a) and

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, shall not apply to the sale (the

Sale) by the Plan of certain real property

(the Property) to Robert M. Hegg, (Mr.

Hegg), a party in interest with respect to

the Plan; provided the following

conditions are satisfied:

(A) The terms and conditions of the

transaction are no less favorable to the

Plan than those which the Plan would

receive in an arm’s-length transaction

with an unrelated party;

(B) The Sale is a one-time transaction

for cash;

(C) The Plan incurs no expenses from

the Sale; and

(D) The Plan receives as consideration

from the Sale the greater of either the

fair market value of the Property as

determined by a qualified, independent

appraiser on the date of the Sale, or an

amount equal to the funds expended by

the Plan in acquiring and maintaining

the Property, less any income produced

by the Property.

For a more complete statement of the

facts and representations supporting the

Department’s decision to grant this

exemption, refer to the Notice of

Proposed Exemption published on

February 26, 1998, at 63 FR 9868.

FOR FURTHER INFORMATION CONTACT: Mr.

C. E. Beaver 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 to which the exemptions

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) These exemptions are

supplemental to and not in derogation

of, any other provisions of the Act and/

or the Code, including statutory or

administrative exemptions and

transactional rules. Furthermore, the

fact that a transaction is subject to an

administrative or statutory exemption is

not dispositive of whether the

transaction is in fact a prohibited

transaction; and

(3) The availability of these

exemptions is subject to the express

condition that the material facts and

representations contained in each

application accurately describes all

material terms of the transaction which

is the subject of the exemption.

Signed at Washington, D.C., this 17th day

of April, 1998.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 98–10693 Filed 4–21–98; 8:45 am]

BILLING CODE 4510–29–P

LEGAL SERVICES CORPORATION

Notice of Availability of 1999

Competitive Grant Funds

AGENCY: Legal Services Corporation.

ACTION: Solicitation for Proposals for the

Provision of Civil Legal Services.

SUMMARY: The Legal Services

Corporation (LSC or Corporation) is the

national organization charged with

administering federal funds provided

for civil legal services to the poor.

The Corporation hereby announces

the availability of competitive grant

funds and is soliciting grant proposals

from interested parties who are

qualified to provide effective, efficient

and high quality civil legal services to

eligible clients in the states and

territories by service area(s) identified

below. The exact amount of

congressionally appropriated funds and

the date, terms and conditions of their

availability for calendar year 1999 have

not been determined.

DATES: Request for Proposals (RFP) will

be available after May 15, 1998. Notice

of Intent to Compete is due July 1, 1998.

Grant proposals must be received at LSC

offices by 5:00 p.m. EDT, July 22, 1998.

ADDRESSES: Legal Services

Corporation—Competitive Grants, 750