Federal Register / Vol. 90, No. 3 / Monday, January 6, 2025 / Notices 675 

1The procedures for requesting an exemption are 

set forth in 29 CFR part 2570, subpart B (76 FR 

66637, 66644, October 27, 2011). Effective 

December 31, 1978, section 102 of the 

Reorganization Plan No. 4 of 1978, 5 U.S.C. app. 1 

(1996), transferred the authority of the Secretary of 

the Treasury to issue administrative exemptions 

under the Code section 4975(c)(2) to the Secretary 

of Labor. Accordingly, the Department grants this 

exemption under its sole authority. 

2 89 FR 59161. 

3This determination is set forth in the 

Independent Appraiser’s written report, dated 

December 16, 2021. 

part 7 of the Employee Retirement 

Income Security Act (ERISA), and 

subchapter B of chapter 100 of the 

Internal Revenue Code (Code). 

Section 102 of the No Surprises Act 

added Code section 9816, ERISA section 

716, and PHS Act section 2799A–1, 

which contain limitations on cost 

sharing and requirements for initial 

payments for emergency services and 

for nonemergency items and services 

furnished by nonparticipating providers 

at participating health care facilities. In 

addition, section 103 of the No 

Surprises Act amended Code section 

9816, ERISA section 716, and PHS Act 

section 2799A–1 to establish a Federal 

independent dispute resolution (Federal 

IDR) process that nonparticipating 

providers or facilities and group health 

plans and health insurance issuers in 

the group and individual market may 

use following the end of an 

unsuccessful open negotiation period to 

determine the out-of-network rate for 

certain services. More specifically, the 

Federal IDR provisions may be used to 

determine the out-of-network rate for 

certain emergency services, 

nonemergency items and services 

furnished by nonparticipating providers 

at participating health care facilities, 

where an All-Payer Model Agreement or 

specified State law does not apply. 

Finally, section 105 of the No Surprises 

Act created Code section 9817, ERISA 

section 717, and PHS Act section 

2799A–2 which contain limitations on 

cost sharing and requirements for initial 

payments for air ambulance services, 

and allow plans and issuers and 

providers of air ambulance services to 

access the Federal IDR process. 

The Federal IDR process requires a 

number of disclosures from plans, 

issuers, FEHB carriers, and 

nonparticipating providers or 

nonparticipating emergency facilities. 

The Department has received approval 

from OMB for this ICR under OMB 

Control No. 1210–0169. The current 

approval is scheduled to expire on 

November 30, 2025. 

II. Focus of Comments 

The Department is particularly 

interested in comments that: 

• Evaluate whether the collections of 

information are 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 collections 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., by permitting electronic 

submissions of responses. 

Comments submitted in response to 

this notice will be summarized and/or 

included in the ICR for OMB approval 

of the information collection; they will 

also become a matter of public record. 

Signed at Washington, DC, this 26th day of 

December 2024. 

Lisa M. Gomez, 

Assistant Secretary, Employee Benefits 

Security Administration, U.S. Department of 

Labor. 

[FR Doc. 2024–31607 Filed 1–3–25; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Prohibited Transaction Exemption 2024– 

05; Application No. L–12006] 

Exemption for Associated General 

Contractors of America, San Diego 

Chapter, Inc. Apprenticeship and 

Training Fund, Located in San Diego, 

CA 

AGENCY: Employee Benefits Security 

Administration, Department of Labor. 

ACTION: Notice of exemption. 

SUMMARY: This document gives notice of 

an individual exemption from certain 

prohibited transaction restrictions of the 

Employee Retirement Income Security 

Act of 1974, as amended (ERISA or the 

Act). The exemption permits the 

Associated General Contractors of 

America, San Diego Chapter, Inc. (the 

Chapter) to lease certain improved real 

property (the Property) located in San 

Diego, California to the Associated 

General Contractors of America, San 

Diego Chapter, Inc. Apprenticeship and 

Training Fund (the Plan or the 

Applicant). 

DATES: Exemption date: This final 

exemption is in effect as of October 1, 

2020. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Frank Gonzalez, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, U.S. 

Department of Labor, (202) 693–8553 

(this is not a toll-free number). 

SUPPLEMENTARY INFORMATION: The Plan 

requested an exemption pursuant to 

ERISA section 408(a) and supplemented 

the request with certain additional 

information (that is collectively, referred 

to as the ‘‘Application’’).1 On July 22, 

2024, the Department published a notice 

of proposed exemption in the Federal 

Register (the Proposed Exemption).2

Based on the Applicant’s 

representations in the Application and 

the administrative record, the 

Department has determined to grant the 

Proposed Exemption. This exemption 

provides only the relief specified herein 

and does not provide relief from 

violations of any law other than the 

prohibited transaction provisions of 

ERISA. 

Benefits of the Exemption: The 

Department is granting retroactive and 

prospective relief based in part on the 

Applicant’s representations that, among 

other things, the lease has permitted the 

Plan to provide benefits more efficiently 

to its participants during the COVID–19 

pandemic and thereafter at a monthly 

rental rate that saved the Plan $4,359 

per month in 2020 and $6,311 per 

month in 2021, respectively, based on 

the Property’s appraised monthly fair 

market rental value of $46,938 on 

October 1, 2020 and $48,890 on October 

1, 2021.3 The Plan’s monthly savings 

will continue to increase if the 

appraised rental value increases subject 

to escalation terms of the lease that are 

described below. The transaction will be 

subject to further protection, because an 

independent fiduciary will be 

responsible for ensuring that the Plan 

does not pay more than fair market 

value rent under the Lease. 

As discussed below, the Department 

makes the requisite findings under 

ERISA section 408(a) based on the 

Applicant’s adherence to all the 

exemption’s conditions at all times. 

Accordingly, affected parties should be 

aware that the Applicant’s adherence to 

all conditions incorporated in this 

exemption is necessary for the 

Department to grant the relief that the 

Applicant requested. Absent these 

conditions, the Department would not 

have granted this exemption. 


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4Also, in addition to a base rent, tenants subject 

to triple net leases are often required to reimburse 

the landlord for certain expenses and recovery 

provisions for expenses range from absolutely net 

(whereby the tenant pays all property expenses) to 

fully gross (in which tenant pays no expenses). 

These provisions can vary by property type, locale 

and fall anywhere within the net to gross range. 

Background 

1. As discussed in the Proposed 

Exemption, the Plan provides 

apprenticeship training for construction 

trade employees within five Southern 

California counties. The Plan is funded 

by participating employers (contributing 

approximately 90% of the Plan’s annual 

funding) and the State of California 

(contributing approximately 10% of the 

Plan’s annual funding). Apprentices do 

not contribute to the Plan. The Plan’s 

most recent audited financial statements 

reflect that the Plan’s total assets were 

$13,681,005 as of March 31, 2024. 

2. The Plan’s Board of Trustees (the 

Board) is comprised of six individual 

members (the Trustees) of participating 

construction trade employers. The 

Trustees make all of the Plan’s 

administrative and investment decisions 

including decisions about the lease that 

is the subject of this exemption. 

The Plan Sponsor: The Chapter 

3. The Plan is sponsored by the 

Chapter, which is a trade organization 

founded in 1927 to promote the 

interests of employers in the 

construction industry located in San 

Diego, California. A Board of Directors 

comprised of construction trade 

employers manages the Chapter. 

The Plan’s Facilities Before October 1, 

2020 

4. The Applicant represents that 

before October 1, 2020, the Plan leased 

three different properties from unrelated 

parties comprising 11,293 square feet 

that it used for administrative, 

educational, and training purposes. 

According to the Applicant, the 

facilities on these properties lacked 

adequate square footage and had 

outdated training technology, which 

resulted in increased costs and wasted 

resources for the Plan. In addition, one 

of the properties was located more than 

three miles from the other two 

properties. 

The Chapter’s Property 

5. On January 18, 2018, the Chapter 

and the Plan entered into a 

Memorandum of Understanding (MOU) 

documenting their shared interest in 

providing a ‘‘world class apprenticeship 

program’’ in a ‘‘modernized facility.’’ 

Following execution of the MOU, the 

Chapter acquired unimproved real 

property located at 10140 Riverford 

Road, Lakeside, California (the Parcel) 

from Lakeside Land Co., a California 

limited liability corporation (the LLC). 

The LLC is not a member of the Chapter, 

there are no common directors between 

the LLC and the Chapter, and no LLC 

directors are Plan Trustees. The LLC has 

neither contributed to nor participated 

in the Plan, nor does the LLC participate 

in the Plan’s apprenticeship training 

programs. 

6. In 2020, the Chapter constructed a 

high-ceiling training space on the Parcel 

comprising approximately 43,600 

square feet (the Building). The Chapter’s 

acquisition of the Parcel, and 

subsequent construction of the Building, 

was based on the Plan’s intent 

expressed in the MOU to sign a 10-year 

lease to use both the Building once 

constructed and an unimproved exterior 

lot (the Property). 

The Lease 

7. On April 25, 2019, the Plan 

Trustees acting on behalf of the Plan, 

caused the Plan to enter into an 

agreement with the Chapter to lease 

both a portion of the Building (once 

constructed) and an unimproved 

exterior lot located in the Parcel (the 

Lease), subject to the review and 

approval of both a qualified 

independent fiduciary (described below, 

the Independent Fiduciary) and the 

Department. 

8. The Lease’s term is for 10 years, 

under which the Plan holds a leasehold 

interest to occupy and use 90 percent of 

the Building’s rentable space (39,115 

square feet of the Building’s total space 

of 43,600 square feet) and an 

unimproved exterior lot along with 

rights to use the Property’s common 

areas. The Chapter utilizes the 

remaining 10 percent of the Building’s 

rentable space and has no present plans 

to change the Building’s space 

allocation. 

9. The Plan’s initial base rent under 

the Lease is $40,000 per month or 

approximately $1.02 per square foot (the 

Base Rent). This expense during a 

twelve (12) month period is about 3.5 

percent of the Plan’s total assets as 

reflected in the Plan’s audited financial 

statements for accounting year ending 

March 31, 2024. The Base Rent is 

subject to annual increases that are 

discussed further below. 

The Independent Appraiser 

10. On May 17, 2019, the Plan 

engaged Cushman & Wakefield Western 

Inc. as the Independent Appraiser to 

determine the Property’s fair market 

rental value. Trevor G. Chapman, a 

California licensed Certified General 

Real Estate Appraiser, who is an 

employee of the Independent Appraiser, 

performed the appraisal. 

11. Mr. Chapman represents that the 

Independent Appraiser has no present 

or prospective interest in the Property 

that is subject to the Lease, and no 

personal interest with respect to the 

Plan and the Chapter. In addition, Mr. 

Chapman represents that the 

Independent Appraiser’s annual gross 

revenues derived from parties in interest 

with respect to the Plan represented 

0.37% of its gross revenues for the 2020 

tax year. Furthermore, the Independent 

Appraiser’s agreement with the Plan 

does not contain any provisions that 

provide for the Plan to: (1) directly or 

indirectly indemnify or reimburse the 

Independent Appraiser or any other 

party for any failure to adhere to their 

contractual obligations or to State or 

Federal laws applicable to the 

Independent Appraiser’s work; or (2) 

waive any rights, claims or remedies of 

the Plan or its participants and 

beneficiaries under ERISA, the Code, or 

other Federal and State laws against the 

Independent Appraiser with respect to 

the transaction(s) that are the subject of 

the exemption. 

12. Mr. Chapman inspected the 

Property on July 1, 2019, to collect 

primary and secondary data related to 

the Property, investigate the general 

trends in the regional economy and 

local area, analyzed rental data where 

appropriate, and reviewed (i) the cost 

estimates based upon submitted 

architects’ plans, and (ii) the proposed 

Lease using generally accepted marketderived appropriate methods and 

procedures. In a written report (the 

Independent Appraisal Report) dated 

October 23, 2019, Mr. Chapman 

determined that the Property’s fair 

market rental rate was $44,443 per 

month, which represented $1.14 per 

square foot of the Plan’s rentable space. 

13. According to the Independent 

Appraiser, the Lease is a triple net lease, 

which the Independent Appraiser notes 

is a type of commercial lease wherein 

the lessee is responsible for its pro rata 

share of expenses for common area 

maintenance, taxes, and insurance.4

Notwithstanding the types of 

commercial leases that may exist in any 

given marketplace, the Independent 

Appraiser informed the Department that 

the Property subject to the Lease is 

located in a market area in which 

commercial leases are typically written 

on a triple-net basis with tenants 

responsible for all operating expenses, 

including common area maintenance, 

taxes, and insurance. Lease terms within 

the Property’s market are generally 

between 3 and 7 years for industrial 


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5Furthermore, the Department notes that section 

II(c)(1) of the exemption requires that the 

Independent Fiduciary must not be directly or 

indirectly controlled by or through one or more 

intermediaries, or under common control with 

either the Chapter, the Plan, or any related 

employers’ members. 

6ERISA section 410 provides, in part, that 

‘‘except as provided in ERISA Sections 405(b)(1) 

and 405(d), any provision in an agreement or 

instrument which purports to relieve a fiduciary 

from responsibility or liability for any 

responsibility, obligation, or duty under this part 

[meaning part 4 of title I of ERISA] shall be void 

as against public policy.’’ 

7The Independent Fiduciary represents that the 

Trustees appeared to have undertaken a reasonable 

and thorough process before making this decision. 

The Independent Fiduciary represents that the 

Trustees had explored other alternatives and real 

estate properties in the area. Specifically, starting in 

year 2015, the Trustees began searching for new 

facilities. The Trustees evaluated 12 real properties, 

comprised of six existing buildings, three parcels of 

open land for building, two properties for operating 

engineer usage, and the additional annex near the 

then current facility. 

tenants and contain annual escalations 

of 3.0 percent. 

The Independent Fiduciary 

14. On October 27, 2019, the Plan 

Trustees retained the services of 

Prudent Fiduciary Services, LLC (PFS) 

of Los Angeles, California, to serve as 

the Plan’s Independent Fiduciary with 

respect to the Lease. Specifically, Mr. 

Miguel Paredes, a principal with PFS, 

was appointed to undertake the duties 

and responsibilities on behalf of PFS in 

its role as the Plan’s Independent 

Fiduciary to ensure that the Lease 

arrangement complied with ERISA. 

15. The Independent Fiduciary 

represents that neither Mr. Paredes nor 

PFS had a pre-existing relationship with 

the Plan or the Chapter. The 

Independent Fiduciary also represents 

that for year 2019 Mr. Paredes and PFS 

expect to derive approximately 0.55 

percent of their combined annual gross 

revenues from the Plan and parties in 

interest with respect to the Plan.5 The 

Independent Fiduciary’s agreement with 

the Plan did not contain any provisions 

that violate ERISA section 410 or the 

Department’s Regulations codified at 

§ 2509.75–4; 6 and did not contain any 

provision requiring the Plan or any 

other party to (1) directly or indirectly 

indemnify or reimburse the 

Independent Fiduciary for any failure to 

adhere to its contractual obligations or 

to State or Federal laws applicable the 

Independent Fiduciary‘s work, or (2) 

waive any rights, claims, or remedies 

under ERISA, State, or Federal law 

against the Independent Fiduciary with 

respect to the transaction(s) that are the 

subject of the exemption. 

16. The Independent Fiduciary 

examined whether the Lease would be 

reasonable, prudent, and in the interest 

and protective of the Plan and its 

participants and beneficiaries. To 

perform this examination, the 

Independent Fiduciary: (a) reviewed 

various documents, such as the 

Independent Appraisal Report, trust 

agreements, IRS Forms 990, financial 

statements, written policies, guidelines, 

and procedures, lease agreements, 

applicable laws and guidance, and the 

Plan Trustees’ meeting minutes; (b) 

interviewed and/or held discussions 

with representatives of the Plan; (c) 

conducted an in-person site visit to the 

Property; and (e) considered the Plan 

Trustees’ decision-making process with 

respect to entering into the Lease.7

17. In a report dated October 28, 2019 

(the Independent Fiduciary Report), the 

Independent Fiduciary noted that the 

Property allows for onsite heavy 

equipment operator training, which was 

not an option in the Plan’s former 

location due to space constraints. The 

new location also represents an upgrade 

in size and quality compared to the 

current property, which should translate 

into better training programs. The 

Independent Fiduciary stated that 

having the classrooms and 

apprenticeship/training offices in the 

same location as the Chapter offices 

potentially improves the operation and 

efficiency of the training programs 

because the Chapter’s oversight and 

resources are nearby. The Independent 

Fiduciary also noted that the Plan and 

Chapter share an interest in providing 

high quality apprenticeship and 

continuing training education programs 

because the Plan would be better able to 

provide benefits to its participants and 

beneficiaries and the Chapter would be 

able to use the training programs to 

promote its membership. 

18. The Independent Fiduciary 

reviewed the Independent Appraiser’s 

specific qualifications, including his 

education, prior experience, and 

professional licenses, memberships, and 

affiliations. Based upon its review, the 

Independent Fiduciary determined that 

the Independent Appraiser possessed 

the appropriate training, experience, 

and facilities to provide a qualified 

appraisal report on behalf of the Trust 

Fund regarding the subject property. 

19. The Independent Fiduciary next 

examined the Independent Appraiser’s 

independence. The Independent 

Fiduciary represents that it did not find 

any relationship between Chapman or 

Cushman, or any affiliates, to the parties 

that would be engaging in the 

transaction contemplated by the Lease 

Agreement. The Independent 

Fiduciary’s review also did not reveal 

any other information that would call 

into question the Independent 

Appraiser’s independence. 

20. The Independent Fiduciary next 

determined whether the payments from 

the Plan to the Chapter under the Lease 

would be reasonable. To perform this 

task, the Independent Fiduciary 

reviewed the methodology provided by 

the Independent Appraiser to calculate 

the fair market rent, which included 

comparing comparable rental properties, 

having discussions with local brokers, 

and testing the Independent Appraiser’s 

conclusions through a return on cost 

analysis. The Independent Fiduciary 

adjusted the Lease’s base rent of $1.02 

per square foot upwards by $0.07 per 

square foot to account for the Plan’s 

additional $2,579 monthly payments to 

a Capital Replacement Reserve Fund 

(the Reserve Fund), which is described 

in more detail below, and determined 

that even with the adjusted rate, the 

Lease’s adjusted monthly rent of $1.09 

per square foot is less than its appraised 

fair market value of $1.14 per square 

foot. Additionally, the Independent 

Fiduciary noted that leases in the 

Property’s subject market are typically 

written on a triple net basis, which is 

consistent with the structure of the 

Lease. The Independent Fiduciary 

stated that it also reviewed the 

properties and key lease information 

used in the Independent Appraisal 

Report analysis of rental activity for 

comparable space in similar properties 

in the Property’s subject market and 

found that the selected comparable 

properties were appropriate and 

reasonably similar. The Independent 

Fiduciary noted how other lease terms, 

such as rent escalation clauses, 

duration, and tenant improvement 

allowances contained in the comparable 

leases that the Independent Appraiser 

identified compared to those in the 

Lease. For the reasons set forth above, 

the Independent Fiduciary determined 

that the arrangements provided under 

the Lease are necessary for the operation 

of the Plan and that the compensation 

to be paid by the Plan to the Chapter is 

reasonable. It also determined that 

entering into the Lease was reasonable, 

prudent, and in the Plan’s interest. 

21. On July 28, 2020, the Independent 

Fiduciary issued an addendum and 

supplement to the Independent 

Fiduciary Report. In the addendum, the 

Independent Fiduciary agreed to 

perform the following additional duties 

on behalf of the Plan: (a) monitor the 

terms of this exemption on an ongoing 

basis and take all actions that are 

necessary and proper to enforce the 

Plan’s rights under the Lease to protect 

the Plan’s participants and beneficiaries; 

(b) review and approve the material 


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8This determination is set forth in the 

Independent Appraiser’s written report, dated 

December 16, 2021. 

9As described below, the Plan was required to 

pay, in addition to $40,000 per month, an 

additional $2,579 into a Reserve Fund for certain 

maintenance expenses, which is considered an 

additional component of rent. 

10Because the exemption provides retroactive 

exemptive relief, within 60 days of the date of 

publication of the notice of exemption in the 

Federal Register (the Publication Date), the 

Independent Fiduciary will provide a summary of 

all amendments, modifications, or extensions of the 

Lease made between October 1, 2020, and the 

Publication Date. 

11CPI means the Consumer Price Index; the 

Department’s Bureau of Labor Statistics publishes 

the CPI. The Lease also provides that ‘‘. . . [t]he CPI 

terms and conditions of the Lease and 

make any adjustments thereto; (c) 

engage the Independent Appraiser and/ 

or other service providers as it 

reasonably deems necessary; (d) monitor 

the Lease, including during any 

subsequent renewal period; and (e) 

ensure that all conditions of this 

exemption are met. The obligations in 

the addendum have been added to the 

Independent Fiduciary conditions for 

the exemption below. 

22. The exemption requires the 

Independent Fiduciary to engage a 

qualified independent appraiser to 

perform an independent appraisal of the 

Property following the beginning date of 

the Lease on a periodic basis as 

prudence requires to ensure the Plan 

does not pay more than fair market 

value rent under the Lease. The 

Independent Fiduciary must regularly 

evaluate the prudence of the Plan’s 

continued participation in the Lease and 

ensure that its participation in the Lease 

remains in the interest and protective of 

the interests of the Plan’s participants 

and beneficiaries. The Plan’s ongoing 

participation in the Lease requires the 

ongoing approval and consent of the 

Independent Fiduciary. The 

Independent Fiduciary is responsible 

for selecting the independent appraiser, 

the frequency of appraisals, and the 

assessment of the reliability of the 

appraisals in determining fair market 

value rent. The Plan may continue to 

participate in the Lease during any 

period only to the extent the 

Independent Fiduciary has affirmatively 

determined that participation in the 

Lease remains in the interest and 

protective of the Plan and its 

participants and beneficiaries. The 

amounts that the Plan has paid or will 

continue to pay under the Lease may 

not exceed fair market value rent. 

23. In the July 28, 2020, supplement 

to the Independent Fiduciary Report, 

the Independent Fiduciary stated that 

the Plan needed more space to comply 

with social distancing requirements and 

guidelines in the COVID–19 

environment and to enable the Plan to 

offer sufficient classes in a manner 

compliant with State Division of 

Apprenticeship Standards Guidelines. 

In the supplement, the Independent 

Fiduciary confirmed that the Plan’s 

entering into the Lease was reasonable, 

prudent, and in the interest of the Plan. 

24. On October 1, 2020, the Plan 

moved into the Building under the 

terms of the Lease stating that it 

urgently needed larger space due to the 

then COVID–19 health pandemic. 

Subsequent to the Plan moving into the 

Building, the Independent Appraiser 

conducted another appraisal of the 

Property and determined that the 

Property’s fair market monthly rental 

value was $46,938 as of October 1, 2020 

and $48,890, as of October 1, 2021.8

Therefore, the Department notes that the 

Lease’s monthly payment terms that 

require the Plan to pay a base rent of 

$40,000 and $2,579 into the Reserve 

Fund saves the Plan $4,359 and $6,311 

on a monthly basis for Lease years 2020 

and 2021 compared to the Property’s 

appraised fair market rental value for 

those years.9 Additionally, on January 

14, 2022, the Independent Fiduciary 

represented to the Department that for 

the period beginning on October 1, 

2020, the Lease’s terms, including the 

base monthly rent of $40,000 per month, 

were in the interest of and of, the Plan 

and its participants and beneficiaries 

and reflected a below fair market rent 

for the subject premises. 

Other Duties of the Independent 

Fiduciary 

25. The Independent Fiduciary must 

ensure that the Lease is in the interest 

and protective of the Plan and its 

participants and beneficiaries, including 

with respect to any amendment or 

renewal of the Lease. Further, the 

Independent Fiduciary must take all 

necessary and proper steps to ensure 

that the Plan and its participants and 

beneficiaries are protected in 

connection with the Lease, which 

include approving any amendment or 

renewal thereof. Beginning on the day 

that the notice of exemption is 

published in the Federal Register, the 

Independent Fiduciary must ensure that 

the Plan’s total payments under the 

Lease during a twelve (12) month period 

do not exceed ten (10) percent of the 

Plan’s total assets as reflected in the 

most recently issued report from the 

independent accounting firm 

responsible for auditing the Plan’s 

financial statements. 

In order to ensure that the Lease and 

its terms continue to be in the interest 

of Plan and its participants and 

beneficiaries, this exemption requires 

the Independent Fiduciary to provide 

prior written notice to the Department’s 

Office of Exemption Determinations at 

least 60 days before the Lease is 

amended, modified, or extended, unless 

such delay would cause imminent harm 

to the Plan in which case the notice 

must be provided immediately. The 

notification must include a complete 

description of the amendment, 

modification, or extension, including all 

material terms.10 Additionally, the 

Independent Fiduciary must notify the 

Chapter of the Plan’s intention to extend 

the Lease beyond the initial 10-year 

term, and any subsequent renewal must 

not exceed five-years. 

The Independent Fiduciary while 

acting on the Plan’s behalf with respect 

to the Lease, must not be directly or 

indirectly controlled by or through one 

or more intermediaries or under 

common control with either the 

Chapter, the Plan, or any related 

employers’ members. 

26. The Independent Fiduciary has 

not entered into and must not enter into 

any agreement or instrument that 

violates either ERISA section 410 or the 

Department’s Regulations codified at 

§ 2509.75–4; and has not entered and 

must not enter into any agreement, 

arrangement, or understanding that 

includes any provision that provides for 

the direct or indirect indemnification or 

reimbursement of the Independent 

Fiduciary by the Plan or other party for 

any failure to adhere to its contractual 

obligations or to State or Federal laws 

applicable the Independent Fiduciary‘s 

work, or that waives any rights, claims, 

or remedies of the Plan under ERISA, 

state, or Federal law against the 

Independent Fiduciary with respect to 

the transaction(s) that are the subject of 

the exemption. 

Other Lease Terms 

27. The Lease defines the formula to 

be used in determining annual increases 

to the Base Rent as follows: 

Beginning on the date that is one (1) year 

after the Commencement Date [Lease’s start 

date], and on each successive one-year 

anniversary thereof (each an ‘Adjustment 

Date’) throughout the [t]erm, the Base Rent 

shall be increased by the amount of increase 

in the CPI . . . [s]uch increase shall be 

calculated by multiplying the then-current 

Base Rent by a fraction, the numerator of 

which shall be the CPI for the Adjustment 

Date and the denominator of which shall be 

the CPI for the previous Adjustment Date (or 

the CPI for the Commencement Date in case 

of the adjustment for the first Adjustment 

Date). If there is no increase in CPI, or a 

decrease in CPI, the Base Rent shall remain 

unchanged.’’ 11


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for any Adjustment Date shall be the CPI for the 

most recent month for which it is published before 

the Adjustment Date (or before the Commencement 

Date, as the case may be).’’ The Department 

understands such Base Rent increase calculation to 

mean that the Base Rent may increase annually 

based on the published CPI for the applicable 

period. 

12The Lease defines Operating Expenses as 

additional rent for costs that the Chapter incurs, 

which include the following: (1) operation, repair, 

maintenance, and replacement of the common 

areas; (2) trash disposal, janitorial and security 

services; (3) any service provided by the Chapter 

that is an operating expense under the Lease; (4) the 

cost of the premiums for the liability and property 

insurance policies required to be maintained by the 

Chapter under the Lease; (5) the cost of water, 

sewer, gas, electricity, solar panels, and other 

publicly mandated services; (6) labor, salaries and 

applicable fringe benefits and costs, materials, 

supplies and tools, used in maintaining and/or 

cleaning the premises, and accounting and 

management fees attributable to the operation of the 

premises; (7) replacing and/or adding 

improvements mandated by any governmental 

agency and any repairs or removals necessitated 

thereby; (8) replacements of equipment or 

improvements, as amortized over such equipment 

or improvements’ useful life for depreciation 

purposes according to federal income tax 

guidelines; (9) reserves set aside for maintenance, 

repair and/or replacement of common area 

improvements and equipment as set forth in the 

Lease’s Addendum ; (10) environmental damages 

and earthquake coverage to the extent not recovered 

by Chapter directly from any tenants; and (11) all 

taxes, assessments and charges levied on or with 

respect to the facility, or any personal property of 

the Chapter used in the operation thereof and 

payable by the Chapter. 

13The Independent Fiduciary’s duties include 

reviewing and approving the Lease’s Operating 

Expenses provisions. 

14As noted above, the Independent Fiduciary 

determined that these payments had the effect of 

adjusting the Lease’s base rent of $1.02 per square 

foot upward by $0.07 per square foot. 

15The Lease provides a life cycle costs analysis 

for the Reserve Fund Items, which considers all 

costs of acquiring, operating, maintaining, and 

disposing of a building component or system. 

16The Reserve Fund includes the following 

additional items: backflow preventers on site 

utilities; casework and countertops; sheet metal, 

caulking, joint sealants; roofing maintenance and 

re-roofing; doors, frames, and hardware; operable 

walls in classroom; coiling service doors; glass and 

glazing storefront system; ceramic tile; flooring 

carpet replacement and base; paint and coatings; 

elevator; plumbing; HVAC equipment; electrical 

and site lighting; and fire alarm and security 

system. 

17As described in more detail above, the 

Independent Fiduciary determined that the 

aforementioned Lease terms, including the Reserve 

Fund provision, were prudent, and in the interest 

of the Plan. Moreover, this exemption prohibits the 

Plan’s participants from paying any Plan operating 

expenses, including amounts paid into the Reserve 

Fund. 

28. Notwithstanding the Lease’s CPI 

Base Rent annual increases provision 

discussed above, and as further 

described below, the Independent 

Fiduciary must ensure that the total 

amount paid by the Plan in connection 

with the Lease does not exceed the fair 

market rental value. 

29. In addition to the Base Rent, the 

Lease requires the Plan to pay certain 

operating expenses (the Operating 

Expenses).12 The Operating Expenses 

are subject to both an annual 

reconciliation process (the Annual 

Reconciliation) and the Plan’s exercise 

of audit rights, because of the Building’s 

90/10 allocation ratio between the Plan 

and the Chapter. The computation of the 

Operating Expenses must be made in 

accordance with fair and reasonable 

accounting principles customarily 

applied by owners of similar properties 

located in San Diego, California.13

30. The Lease requires both the Plan 

and the Chapter to make pro rata 

monthly payments to the Reserve Fund 

based on their space utilization. The 

Lease requires the Chapter to pay $136 

per month for occupying 4,485 square 

feet while the Plan must pay $2,579 per 

month for occupying 39,115 square 

feet.14 The Reserve Fund’s monthly 

amounts will remain the same 

throughout the Lease’s duration, 

including extensions. 

31. The Reserve Fund is intended to 

segregate payments for future 

replacement needs and its calculations 

are based on reasonable life 

expectancy 15 and anticipated 

replacement costs of the Reserve Fund 

Items; as such, the Reserve Fund is not 

subject to the Annual Reconciliation 

provision. 

32. The Reserve Fund may only be 

used for the replacement of certain 

items (such as roofing, doors, frames 

and hardware, flooring, asphalt and 

concrete paving and resealing, fencing 

and gates, etc.) that are listed in the 

Lease’s addendum. The Reserve Fund 

may not be used for any other purpose 

unless agreed to by both the Chapter 

and the Plan, subject to the Independent 

Fiduciary’s approval.16

33. Further, the Lease requires the 

Chapter to keep the Property, including 

interior and exterior walls, roof, and 

common areas, in good condition and 

repair except that the Plan is 

responsible for day-to-day maintenance 

and repairs to the interior of its 

allocated rented space to the extent such 

cost is attributable to causes beyond 

normal wear and tear. The Lease 

requires the Chapter to retain funds held 

in the Reserve Fund in a restricted 

account that may not be used for any 

purpose other than to fund the 

replacement of the items described 

above. Amounts paid by the Plan into 

the Reserve Fund constitute a portion of 

the Plan’s overall consideration paid to 

the landlord, and once the amounts are 

paid into the Reserve Fund, the Plan has 

no legal right to such amounts beyond 

what is described in the Lease. The 

Lease’s termination ends the Plan’s right 

under the Lease. 17

Prohibited Transactions 

34. Absent an administrative 

exemption, the Lease would violate 

ERISA section 406(a)(1)(A), which 

prohibits a fiduciary from causing a 

plan to enter into transaction involving 

a sale, exchange, or lease, of any 

property between a plan and a party in 

interest. The Chapter is a party in 

interest with respect to the Plan under 

ERISA section 3(14)(D) because it is an 

employee organization whose members 

are covered by the Plan. Therefore, the 

Lease would violate ERISA section 

406(a)(1)(A). 

35. Additionally, the Lease would 

violate ERISA section 406(a)(1)(D), 

which prohibits a fiduciary from 

causing the plan to enter into 

transaction involving the transfer to or 

use of any plan assets by or for the 

benefit of a party in interest of a plan. 

Because the Lease requires monthly 

cash payments from the Plan’s assets to 

the Chapter, the payments would be 

considered a transfer of Plan assets to a 

party in interest in violation of ERISA 

section 406(a)(1)(D). 

36. Finally, the Lease would violate 

ERISA section 406(b)(2), which 

prohibits a plan fiduciary from acting in 

its individual capacity or in any other 

capacity in a transaction involving the 

plan on behalf of a party (or 

representing a party) whose interests are 

adverse to the interests of the plan or its 

participants or beneficiaries. Because 

both the Trustees and the Board are 

comprised of individuals representing 

participating employers who are the 

Chapter’s members, these individuals 

are involved on both sides of the Lease 

in violation of ERISA section 406(b)(2). 

37. The Department notes that in 

addition to the protections described 

above, this exemption includes 

protective conditions that allows the 

Plan to retroactively lease the Property 

from the Chapter to utilize its office 

space, classroom space, and training 

facilities to continue carrying out the 

Plan’s goal of providing apprenticeship 

training that is related to the 

construction trade. 

Written Comments Received Regarding 

the Proposed Exemption 

38. In the Proposed Exemption, the 

Department invited all interested 

persons to submit written comments 

and/or requests for a public hearing 

with respect to such notice, which 

comment period ended on September 5, 

2024. The Department received one 

comment that was immediately 


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680 Federal Register / Vol. 90, No. 3 / Monday, January 6, 2025 / Notices 

18The procedures for requesting an exemption are 

set forth in 29 CFR part 2570, subpart B (76 FR 

66637, 66644, October 27, 2011). Effective 

December 31, 1978, section 102 of the 

Reorganization Plan No. 4 of 1978, 5 U.S.C. app. 1 

(1996), transferred the authority of the Secretary of 

the Treasury to issue administrative exemptions 

under the Code section 4975(c)(2) to the Secretary 

of Labor. Accordingly, the Department grants this 

exemption under its sole authority. 

19ERISA section 410 provides, in part, that 

‘‘except as provided in ERISA Sections 405(b)(1) 

and 405(d), any provision in an agreement or 

instrument which purports to relieve a fiduciary 

from responsibility or liability for any 

responsibility, obligation, or duty under this part 

[meaning part 4 of ERISA] shall be void as against 

public policy.’’ 

withdrawn and did not receive any 

hearing requests. 

The complete application file (L– 

12006) is available for public inspection 

in the Public Disclosure Room of the 

Employee Benefits Security 

Administration, Room N–1515, U.S. 

Department of Labor, 200 Constitution 

Avenue NW, Washington, DC 20210 

reachable by telephone at (202) 693– 

8673. For a more complete statement of 

the facts and representations supporting 

the Department’s decision to grant this 

exemption, please refer to the notice of 

proposed exemption published on July 

22, 2024, at 89 FR 59161. 

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 ERISA 

section 408(a) does not relieve a 

fiduciary or other party in interest or 

disqualified person from certain other 

provisions of ERISA and/or the Code, 

including any prohibited transaction 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of ERISA 

section 404, which, among other things, 

require a fiduciary to discharge their 

duties respecting the plan solely in the 

interest of the participants and 

beneficiaries of the plan and in a 

prudent fashion in accordance with 

ERISA section 404(a)(1)(B); 

(2) As required by ERISA section 

408(a), the Department hereby finds that 

the exemption is (1) administratively 

feasible, (2) in the interests of the Plan 

and of its participants and beneficiaries, 

and (3) protective of the rights of the 

participants and beneficiaries of the 

plan; 

(3) The exemption is supplemental to, 

and not in derogation of, any other 

ERISA provisions, 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 availability of this exemption 

is subject to the express condition that 

the material facts and representations 

contained in the Application are true 

and complete at all times, and that the 

Application accurately describes all 

material terms of the transaction which 

is the subject of the exemption. 

Accordingly, after considering the 

entire record developed in connection 

with the Applicant’s exemption 

application, the Department has 

determined to grant the following 

exemption under the authority of ERISA 

section 408(a) in accordance with the 

Department’s exemption procedures 

regulation.18

Exemption 

Section I. Covered Transaction 

The restrictions of ERISA sections 

406(a)(1)(A), (D), and 406(b)(2) shall not 

apply, effective October 1, 2020, to the 

leasing of office, classroom, and training 

facilities (the Lease) located on an 

improved parcel of real property (the 

Property) by the Associated General 

Contractors of America, San Diego 

Chapter, Inc. Apprenticeship and 

Training Fund (the Plan) from the 

Associated General Contractors of 

America, San Diego Chapter, Inc. (the 

Chapter) to provide construction trade 

apprenticeship training to Plan 

participants if the conditions set forth in 

section II are met at all times. 

Section II. General Conditions 

(a) The Plan has paid, and will 

continue to pay, no more than the fair 

market rental value in connection with 

the Lease; 

(b) The Plan’s participants do not 

contribute to the Plan; 

(c) A qualified independent fiduciary 

(the Independent Fiduciary) represents 

the Plan’s interests in all respects to the 

Lease, including by approving the Lease 

and, if warranted, any amendment to or 

renewal of the Lease. Additionally, the 

Independent Fiduciary, acting on the 

Plan’s behalf with respect to the Lease: 

(1) Must not be directly or indirectly 

controlled by or through one or more 

intermediaries, or under common 

control with either the Chapter, the 

Plan, or any related employers’ 

members; 

(2) Reviewed the Lease, including the 

terms and conditions, and determined 

that the Lease was reasonable and in the 

interest of and protective of the Plan 

and its participants and beneficiaries in 

accordance with ERISA’s fiduciary 

duties of prudence and loyalty; 

(3) Confirmed that the initial base rent 

did not exceed the current fair market 

rental value of the Property by 

reviewing an appraisal performed by a 

qualified independent appraiser (the 

Independent Appraiser) both when the 

Plan entered into the Lease, and when 

the Plan began occupying the Property; 

(4) Determined in advance of the 

Plan’s entering into the lease for the 

Property, that the Lease is reasonable, 

prudent, in the interest and protective of 

the Plan and its participants and 

beneficiaries in accordance with 

ERISA’s fiduciary duties of prudence 

and loyalty; 

(5) Must engage a qualified 

independent appraiser to perform an 

independent appraisal of the Property 

following the beginning date of the 

Lease on a periodic basis as prudence 

requires to ensure the Plan does not pay 

more than fair market value rent under 

the Lease. The Independent Fiduciary is 

responsible for the selection of the 

Independent Appraiser, the frequency of 

appraisals, and the assessment of the 

reliability of the appraisals in 

determining fair market value rent; 

(6) Must regularly evaluate the 

prudence of the Plan’s continued 

participation in the Lease and ensure 

that participation in the Lease remains 

in the interest and protective of the 

interests of the Plan’s participants and 

beneficiaries; 

(7) Must monitor the parties’ 

compliance with the terms and 

conditions of the exemption and take all 

necessary and proper steps to ensure 

that the Plan and its participants and 

beneficiaries are completely protected 

throughout the Lease’s term and any 

related transactions (including any 

renewal thereof); 

(8) Must review and approve the 

Lease’s operating expenses on an 

ongoing basis, including but not limited 

to ensuring that the Plan undergoes both 

an annual reconciliation for such 

accrued expenses and it exercises its 

audit rights when prudently needed. 

(9) Must provide prior written notice 

to the Chapter of the Plan’s intention to 

extend the Lease beyond its initial 10- 

year term; 

(10) Has not entered into and must 

not enter into any agreement or 

instrument that violates either ERISA 

section 410 or the Department’s 

Regulations codified at 29 CFR 2509.75– 

4; 19 and 

(11) Has not entered into and must 

not enter into any agreement, 

arrangement, or understanding that 

includes any provision that provides for 

the Plan or other party to: (i) directly or 

indirectly indemnify or reimburse the 

Independent Fiduciary for any failure to 


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Federal Register / Vol. 90, No. 3 / Monday, January 6, 2025 / Notices 681 

adhere to its contractual obligations or 

to State or Federal laws applicable to 

the Independent Fiduciary’s work, or 

(ii) waives any rights, claims, or 

remedies of the Plan under ERISA, 

State, or Federal law against the 

Independent Fiduciary with respect to 

the transaction(s) that are the subject of 

the exemption; 

(d) The Plan’s ongoing participation 

in the Lease requires the continuing 

approval and consent of the 

Independent Fiduciary, and the Plan 

may continue to participate in the Lease 

during any period only to the extent the 

Independent Fiduciary has affirmatively 

determined that participation in the 

Lease remains in the interest and 

protective of the Plan and its 

participants and beneficiaries; 

(e) Any adjustments to the base rent 

under the Lease must be linked to the 

Consumer Price Index for All Urban 

Consumers for the San Diego, California 

area, as published by the Department’s 

Bureau of Labor Statistics; 

(f) Any renewal of the Lease’s initial 

10-year term must be made solely at the 

Plan’s discretion subject to approval by 

the Independent Fiduciary and if the 

Lease is renewed, the Lease term must 

not exceed five-years; 

(g) The Independent Appraiser must 

not have entered into, and must not 

enter into, any agreement, arrangement, 

or understanding that includes any 

provision that provides for the direct or 

indirect indemnification or 

reimbursement of the Independent 

Appraiser by the Plan or any other party 

for any failure to adhere to its 

contractual obligations or to State or 

Federal laws applicable to the 

Independent Appraiser’s work, or that 

waives any rights, claims or remedies of 

the Plan or its participants and 

beneficiaries under ERISA, the Code, or 

other Federal and State laws against the 

Independent Appraiser with respect to 

the transaction(s) that are the subject of 

the exemption; 

(h) The exemption does not cover any 

type of service that is otherwise covered 

under an administrative class 

exemption or a statutory exemption 

from ERISA’s prohibited transaction 

provisions; 

(i) Beginning on the day that the 

notice of exemption is published in the 

Federal Register, the Plan’s total 

payments under the Lease during any 

given twelve (12) month period must 

not exceed ten (10) percent of the Plan’s 

total assets as reflected in the most 

recently issued report from the 

independent accounting firm that 

audited the Plan’s financial statements; 

(j) The terms and conditions of the 

Lease are at least as favorable to the Plan 

as those which the Plan could obtain in 

a comparable lease from an unrelated 

party in an arm’s-length transaction; 

(k) All of the material facts and 

representations provided by the 

Applicant and set forth in the Proposed 

Exemption are true and accurate; and 

(l) Within 60 days after publication 

date of this notice of exemption in the 

Federal Register (the Publication Date), 

the Independent Fiduciary will provide 

a summary of all amendments, 

modifications, or extensions of the 

Lease made between October 1, 2020, 

and the Publication Date. After the 

Publication Date and on an ongoing 

basis, the Independent Fiduciary must 

inform the Department’s Office of 

Exemption determinations if the Lease 

is amended, modified, or extended at 

least 60 days before the amendment, 

modification, or extension unless such 

delay would cause imminent harm to 

the Plan in which case the notice must 

be provided immediately. The 

notification must include a complete 

description of the amendment, 

modification, or extension, including all 

material terms thereof. 

Exemption Date: The exemption is in 

effect as of October 1, 2020. 

Signed at Washington, DC. 

George Christopher Cosby, 

Director, Office of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2024–31599 Filed 1–3–25; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employment and Training 

Administration 

Revised Schedule of Remuneration for 

the Unemployment Compensation for 

Ex-Servicemembers (UCX) Program 

That Reflects the Military Pay Increase 

Effective January 1, 2025 

AGENCY: Employment and Training 

Administration, U.S. Department of 

Labor. 

ACTION: Notice. 

Each year, the Department of Defense 

issues a Schedule of Remuneration used 

by states for UCX purposes. States use 

the schedule to determine Federal 

military wages for UCX ‘‘first claims’’ 

only when the Federal Claims Control 

Center (FCCC) responds to a request for 

information indicating that there is no 

Department of Labor copy of the 

Certificate of Release or Discharge from 

Active Duty, commonly known DD 

Form 214 (DD214) for an individual 

under the social security number 

provided. A response from the FCCC 

that indicates ‘‘no DD214 on file’’ will 

prompt the state to start the affidavit 

process and to use the attached 

schedule to calculate the Federal 

military wages for an unemployment 

insurance or UCX monetary 

determination. 

The schedule applies to UCX ‘‘first 

claims’’ filed beginning with the first 

day of the first week that begins on or 

after January 1, 2025, pursuant to the 

UCX program regulations (see 20 CFR 

614.12(c)). States must continue to use 

the 2024 schedule (or other appropriate 

schedule) for UCX ‘‘first claims’’ filed 

before the effective date of the revised 

schedule. Below is the 2025 Federal 

Schedule of Remuneration recently 

released by the Department of Defense. 

2025 FEDERAL SCHEDULE OF REMUNERATION

[20 CFR 614.12(d)] 

Pay grade Monthly rate Weekly 

(7/30th) 

Daily 

(1/30th) 

1. Commissioned Officers: 

O–10 ..................................................................................................................................... 24,259.71 5,660.60 808.66 

O–9 ....................................................................................................................................... 24,259.71 5,660.60 808.66 

O–8 ....................................................................................................................................... 24,126.29 5,629.47 804.21 

O–7 ....................................................................................................................................... 21,806.52 5,088.19 726.88 

O–6 ....................................................................................................................................... 19,001.34 4,433.65 633.38 

O–5 ....................................................................................................................................... 15,996.69 3,732.56 533.22 

O–4 ....................................................................................................................................... 13,742.88 3,206.67 458.10 

O–3 ....................................................................................................................................... 10,914.71 2,546.77 363.82 


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