66854 Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Notices 

1Pursuant to the provisions contained in 29 CFR 

2510.3–2(d), the IRA is not subject to Title I of the 

Employee Retirement Income Security Act of 1974 

(the Act). However, the IRA is subject to Title II of 

the Act, pursuant to section 4975 of the Code. 

(excluding activation costs) by the 

number of inmate-days incurred for the 

preceding fiscal year, and then by 

multiplying the quotient by 365. 

Under § 505.2, the Director of the 

Bureau of Prisons determined that, 

based upon fiscal year 2004 data, the fee 

to cover the average cost of 

incarceration for Federal inmates in 

2004 was $23,267. 

Harley G. Lappin, 

Director, Bureau of Prisons. 

[FR Doc. 05–21965 Filed 11–2–05; 8:45 am] 

BILLING CODE 4410–05–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Application No. D–11328, et al.] 

Proposed Exemptions; George N. 

Newton, Individual Retirement Account 

(the IRA) 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Notice of proposed exemptions. 

SUMMARY: This document contains 

notices of pendency before the 

Department of Labor (the Department) of 

proposed exemptions from certain of the 

prohibited transaction restrictions of the 

Employee Retirement Income Security 

Act of 1974 (the Act) and/or the Internal 

Revenue Code of 1986 (the Code). 

Written Comments and Hearing 

Requests 

All interested persons are invited to 

submit written comments or requests for 

a hearing on the pending exemptions, 

unless otherwise stated in the Notice of 

Proposed Exemption, within 45 days 

from the date of publication of this 

Federal Register Notice. Comments and 

requests for a hearing should state: (1) 

The name, address, and telephone 

number of the person making the 

comment or request, and (2) the nature 

of the person’s interest in the exemption 

and the manner in which the person 

would be adversely affected by the 

exemption. A request for a hearing must 

also state the issues to be addressed and 

include a general description of the 

evidence to be presented at the hearing. 

ADDRESSES: All written comments and 

requests for a hearing (at least three 

copies) should be sent to the Employee 

Benefits Security Administration 

(EBSA), Office of Exemption 

Determinations, Room N–5649, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Washington, DC 20210. 

Attention: Application No. lll, 

stated in each Notice of Proposed 

Exemption. Interested persons are also 

invited to submit comments and/or 

hearing requests to EBSA via e-mail or 

fax. Any such comments or requests 

should be sent either by e-mail to: 

‘‘moffitt.betty@dol.gov’’, or by fax to 

(202) 219–0204 by the end of the 

scheduled comment period. The 

applications for exemption and the 

comments received will be available for 

public inspection in the Public 

Documents Room of the Employee 

Benefits Security Administration, U.S. 

Department of Labor, Room N–1513, 

200 Constitution Avenue, NW., 

Washington, DC 20210. 

Notice to Interested Persons 

Notice of the proposed exemptions 

will be provided to all interested 

persons in the manner agreed upon by 

the applicant and the Department 

within 15 days of the date of publication 

in the Federal Register. Such notice 

shall include a copy of the notice of 

proposed exemption as published in the 

Federal Register and shall inform 

interested persons of their right to 

comment and to request a hearing 

(where appropriate). 

SUPPLEMENTARY INFORMATION: The 

proposed exemptions were requested in 

applications filed pursuant to section 

408(a) of the Act and/or section 

4975(c)(2) of the Code, and in 

accordance with procedures set forth in 

29 CFR part 2570, subpart B (55 FR 

32836, 32847, August 10, 1990). 

Effective December 31, 1978, section 

102 of Reorganization Plan No. 4 of 

1978, 5 U.S.C. App. 1 (1996), transferred 

the authority of the Secretary of the 

Treasury to issue exemptions of the type 

requested to the Secretary of Labor. 

Therefore, these notices of proposed 

exemption are issued solely by the 

Department. 

The applications contain 

representations with regard to the 

proposed exemptions which are 

summarized below. Interested persons 

are referred to the applications on file 

with the Department for a complete 

statement of the facts and 

representations. 

George N. Newton, Individual 

Retirement Account (the IRA), Located 

in Waco, Texas, Application No. 

D–11328 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 4975(c)(2) of the 

Code and in accordance with the 

procedures set forth in 29 CFR part 

2570, subpart B (55 FR 32836, 32847, 

August 10, 1990). If the exemption is 

granted, the 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 proposed arrangement involving 

the in-kind distributions by the IRA to 

Mr. George N. Newton (Mr. Newton), a 

disqualified person with respect to the 

IRA, in two installments of 50 percent 

(50%) each, of the IRA’s ownership 

interest in an unencumbered, improved 

parcel of real property (the Property) 

located in San Antonio, Texas, in 

connection with the required minimum 

distributions rules under the Code; 

provided the following conditions are 

satisfied: 

(1) The two installments of the inkind distributions by the IRA occur on 

December 30, 2005, through January 3, 

2006; 

(2) The terms and conditions of the 

transactions are at least as favorable to 

the IRA, as the terms of similar 

transactions negotiated at arm’s length 

with unrelated third parties; 

(3) The fair market value of the IRA’s 

interest in the Property is determined by 

an independent, qualified appraiser, as 

of the date the first of the two 

installments of the in-kind distributions 

is made to Mr. Newton; and 

(4) The IRA does not pay any 

commissions, costs, charges, fees, or 

other expenses in connection with the 

in-kind distributions. 

Summary of Facts and Representations 

1. The IRA which is the subject of this 

exemption is an individual retirement 

account, as described under section 

408(a) of the Code.1 The approximate 

aggregate fair market value of the total 

assets of the IRA is $2,648,113, as of 

June 30, 2005. The assets of the IRA 

consist of cash in the amount of 

$1,011,113 and two parcels of improved 

real property worth approximately 

$1,637,000. The custodian of the IRA is 

Sterling Trust Company of Waco, Texas. 

As custodian, the Sterling Trust 

Company is a disqualified person with 

respect to the IRA, pursuant to section 

4975(e)(2)(B) of the Code. 

2. Mr. Newton is the owner of the IRA 

and retains discretion with respect to 

the investment of the assets in the IRA. 

As such, Mr. Newton is a fiduciary with 

regard to the IRA and a disqualified 

person, pursuant to section 

4975(e)(2)(A) of the Code. Mr. Newton 

was born on August 25, 1934, and on 

February 25, 2005, attained the age of 

Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Notices 66855 

2A ‘‘leased fee interest’’ is an ownership interest 

held by a landlord with the rights of use and 

occupancy conveyed by lease to others. In this 

regard, the appraisers valued the ‘‘leased fee 

interest’’ in the Property ‘‘as is’’ by taking into 

account the various existing leases on space in the 

Building. 

701⁄2. The designated beneficiary under 

the terms of the IRA is Mr. Newton’s 

wife. As such, Mrs. Newton is a 

disqualified person with respect to the 

IRA, pursuant to section 4975(e)(2)(F) of 

the Code. 

3. Mr. Newton is the owner of two 

other rollover individual retirement 

accounts at Commonwealth Financial 

Network in Waltham, Massachusetts 

with assets of $1,544,401 and $460,787, 

respectively. These individual 

retirement accounts are invested in cash 

and securities. Neither of these 

individual retirement accounts owns 

any real property. The combined value 

of these individual retirement accounts 

is approximately $2 million dollars. 

4. Individual retirement accounts 

must comply with the minimum 

distribution rules applicable to defined 

contribution retirement plans under 

section 408(a)(6) of the Code. In this 

regard, the required minimum 

distributions must commence no later 

than the first of April following the 

calendar year in which the owner of an 

individual retirement account attains 

the age of 701⁄2. A required minimum 

distribution must be made for each 

‘‘distribution calendar year.’’ The first 

‘‘distribution calendar year’’ is the year 

such owner of an individual retirement 

account reaches age 701⁄2. If the owner 

of an individual retirement account 

makes the election to receive the first 

required minimum distribution on the 

first of April of the year following the 

year such owner attains the age of 701⁄2, 

two minimum distributions must be 

made in that year. If the owner owns 

two or more individual retirement 

accounts, the required minimum 

distributions must be calculated 

separately for each account. The 

separately calculated minimum 

distribution amounts may then be 

totaled and the total amount may be 

distributed from any one or more of 

such individual retirement accounts. 

5. The IRA that is the subject of this 

exemption and the other two individual 

retirement accounts owned by Mr. 

Newton must comply with the 

minimum distribution rules applicable 

to defined contribution retirement plans 

under section 408(a)(6) of the Code. As 

Mr. Newton has attained the age of 701⁄2

in 2005, the first ‘‘distribution calendar 

year’’ is 2005. If Mr. Newton elects to 

make the first required minimum 

distribution before April 1, 2006, then 

two minimum distributions must be 

made in 2006. As Mr. Newton has three 

(3) individual retirement accounts, the 

required minimum distributions for 

each of these accounts must be 

calculated separately, but the total 

amount that is required to be distributed 

may be paid from the IRA which is the 

subject of this exemption. 

6. Mr. Newton proposes to distribute 

in-kind 50 percent (50%) of the IRA’s 

interest in the Property in each of two 

(2) installments which will occur on 

December 30, 2005, through January 3, 

2006. These dates were suggested 

because they are the banking days just 

before and just after the New Year. 

Accordingly, Mr. Newton seeks an 

exemption from section 4975 of the 

Code for any violations that may arise 

in connection with the proposed 

transactions. 

7. The Property which is the subject 

of this proposed exemption is described 

as a good quality, historic eight-story 

office building (the Building) 

constructed in 1902. The Property is 

located on approximately .132 acres of 

land at 314 East Commerce Street in San 

Antonio, Texas. The Building was 

formerly known as the old Alamo 

National Bank Building. 

It is represented that the Property is 

unencumbered by debt, and is managed 

by Cambridge Realty Group, Inc., an 

unrelated third party management 

company. 

The Building contains 33,233 square 

feet of net rentable area. The largest 

tenant in the Building is River 

Enterprises which occupies the ground 

floor space. The second largest tenant is 

Inuit Services, Inc. which occupies 

space on the second floor of the 

Building. It is represented that the 

occupancy rate of the Building is 92.4 

percent (92.4%), as of February 17, 

2005. It is further represented that none 

of the tenants in the Building are 

disqualified persons with respect to the 

IRA, as defined in section 4975(e)(2) of 

the Code. 

8. Richard L. Dugger (Mr. Dugger), 

MAI, CRE, State Certified General Real 

Estate Appraiser, and Cynthia C. Beard 

(Ms. Beard), State Certified General Real 

Estate Appraiser, prepared an appraisal 

report of the Property, dated March 7, 

2005. Mr. Dugger and Ms. Beard are 

associated with Dugger, Canady, Grafe, 

Inc., real estate consultants and 

appraisers. Mr. Dugger and Ms. Beard 

represent that they are qualified real 

estate appraisers with approximately 

thirty-six (36) years and twenty-six (26) 

years of experience, respectively, in 

preparing real estate appraisals and are 

familiar with the Property and with 

similar properties located in the 

surrounding area. In addition, Mr. 

Dugger and Ms. Beard represent that 

they are independent in that they have 

no present or prospective interest in the 

Property and have no personal interest 

or bias with respect to the parties 

involved. 

Mr. Dugger and Ms. Beard’s appraisal 

estimated the value ‘‘as is’’ of a leased 

fee interest 2 in the Property, subject to 

various tenant leases, effective February 

17, 2005, the most recent date of 

inspection. Based on their analysis and 

their inspection of the Property, Mr. 

Dugger and Ms. Beard concluded that 

the value ‘‘as is’’ of a leased fee interest 

in the Property was $1,700,000 dollars. 

It is represented that Mr. Dugger and 

Ms. Beard will update their appraisal of 

the value of the leased fee interest in the 

Property, as of the date the first of the 

two installments of the in-kind 

distributions is made to Mr. Newton. 

9. The applicant maintains that the 

proposed transactions are feasible in 

that the transactions involve a single 

individual and his IRA and address a 

need arising because of the minimum 

distribution provisions, as required by 

the Code. By making the distributions as 

close as possible to the end of 2005 and 

the beginning of 2006, the period of 

time when Mr. Newton and the IRA 

share an ownership interest in the 

Property will be less than five (5) days 

of which only portions of two (2) days 

will be business days. In the opinion of 

the applicant, the risk of a conflict of 

interest developing between Mr. 

Newton and the IRA in this short a 

period of time is curtailed, if not 

eliminated entirely. 

10. The transactions are in the interest 

of the IRA, in that the IRA will be able 

to distribute the Property which is an 

illiquid asset and will avoid a forced 

sale of the Property. The IRA will not 

pay any commissions, costs, fees, or 

other expenses in connection with the 

subject transactions. Further, Mr. 

Newton is personally bearing the cost of 

filing the exemption application and 

paying the cost of the appraisal of the 

Property. 

11. The transactions are structured to 

include certain safeguards for the 

protection of the participant and the 

designated beneficiary of the IRA. In 

this regard, the terms of the transactions 

will be at least as favorable as arm’s 

length terms negotiated with unrelated 

parties. Further, the fair market value of 

the Property has been determined by 

independent, qualified appraisers, and 

such value will be updated, as of the 

date the first of the two (2) installments 

of the in-kind distributions is made to 

Mr. Newton. 

66856 Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Notices 

12. In summary, the applicant 

represents that the proposed 

transactions will meet the statutory 

criteria of section 4975(c)(2) of the Code 

because: (a) The transactions involve a 

single individual and his IRA and 

address a need arising because of the 

minimum distribution provisions, as 

required by the Code; (b) there is 

minimal risk of a conflict of interest 

developing between Mr. Newton and 

the IRA in the short period of time that 

they will share ownership of the 

Property; (c) the terms and conditions of 

the transactions are at least as favorable 

to the IRA as similar terms negotiated at 

arm’s length with unrelated parties; (d) 

the fair market value of the Property 

will be determined by independent, 

qualified appraisers, as of the date the 

first of the two installments of the inkind distributions is made to Mr. 

Newton; and (e) the IRA will not pay 

any commissions, costs, fees, or other 

expenses in connection with the 

transactions. 

Notice to Interested Persons 

Because Mr. Newton is the only 

participant in the IRA, it has been 

determined that there is no need to 

distribute the notice of proposed 

exemption (the Notice) to interested 

persons. Comments and requests for a 

hearing must be received by the 

Department within thirty (30) days of 

the date of publication of the Notice in 

the Federal Register. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Angelena C. Le Blanc of the Department, 

telephone (202) 693–8540. (This is not 

a toll-free number.) 

Anchorage Area Pipe Trades 367 Joint 

Apprenticeship Committee (the Plan), 

Located in Anchorage, Alaska, 

[Application No. L–11293] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the Act 

and in accordance with the procedures 

set forth in 29 CFR part 2570, subpart 

B (55 FR 32836, August 10, 1990). If the 

exemption is granted, the restrictions of 

sections 406(a) and 406(b)(2) of the Act, 

shall not apply to a proposed loan (the 

Loan) to the Plan, to finance a training 

facility (the Training Facility) 

constructed by the Plan, in the amount 

of $750,000, by the Local No. 367 of the 

United Association of Journeymen and 

Apprentices of the Plumbing and 

Pipefitting Industry of the United States 

and Canada (Local No. 367), a party in 

interest with respect to Plan. This 

proposed exemption is subject to the 

following conditions: 

(a) The Plan does not pay any 

commissions, fees or other expenses 

with respect to this transaction, except 

certain specified third party closing 

costs; 

(b) An independent qualified 

fiduciary (the I/F), after analyzing the 

relevant terms of the Loan, determines 

whether such Loan is in the best interest 

of the Plan and its participants and 

beneficiaries; 

(c) In determining the fair market 

value of the Training Facility, the I/F 

obtains a current written appraisal 

report (the Appraisal) from an 

independent qualified appraiser at the 

time of the transaction, and ensures that 

such Appraisal is consistent with sound 

principles of valuation; 

(d) The Loan is for the duration of 15 

years at the prime rate (the Prime Rate) 

as listed in the Wall Street Journal; 

(e) Under the terms of the Loan 

agreement, the Loan is secured by the 

Training Facility and in the event of 

default by the Plan, Local No. 367 has 

recourse only against such facility and 

not against the general assets of the 

Plan; 

(f) The terms and conditions of the 

Loan are at least as favorable to the Plan 

as those which the Plan could have 

obtained in an arm’s length transaction 

with an unrelated third party; and 

(g) The Loan is repaid by the Plan 

with the funds the Plan retains after 

paying all of its operational expenses. 

Summary of Facts and Representations 

1. The Plan is a collectively 

bargained, joint labor-management 

apprenticeship and training trust fund 

which qualifies as an ‘‘employee welfare 

benefit plan’’ under section 3(1) of 

ERISA. Currently, there are 

approximately 481 participants covered 

by the Plan. As of August 31, 2005, the 

approximate value of the Plan’s assets 

totaled $2,799,491 and its current 

liabilities totaled $798,257. The Plan 

owns an outdated training facility 

which did not meet the training 

standards of the Plan. To better address 

the training needs of the journeymen 

and apprentices, the Plan constructed 

the new Training Facility in place of the 

outdated training facility. To finance 

this construction, the Plan borrowed 

funds from a third party bank. In 

anticipation of the new Training 

Facility’s completion, the Plan was 

offered permanent financing by Local 

No. 367 in the amount of $750,000 (i.e., 

the Loan), which is the remaining 

balance of the outstanding construction 

loan with the bank. The Loan from 

Local No. 367 to the Plan is 

approximately 44 percent of the Plan’s 

assets. The loan to value ratio equals 

approximately 0.75 (i.e. 75% of the 

Training Facility’s appraised fair market 

value). 

The Plan provides training to 

journeymen and apprentices 

represented by Local No. 367 of the 

United Association of Journeymen and 

Apprentices of the Plumbing and 

Pipefitting Industry of the United States 

and Canada, which has its offices at 610 

West 54th Avenue in Anchorage, Alaska 

99518. The Plan is administered by the 

Joint Apprenticeship and Training 

Committee (the Trustees) which consists 

of eight trustees. Four represent the 

Union, and the remaining four represent 

the contributing employers. The 

Trustees are responsible for negotiating 

the collective bargaining agreement and 

managing the Plan assets and the 

Training Facility. 

2. The subject property, on which the 

Training Facility is constructed, is 

located at 617 West Potter Drive, 

Anchorage, Alaska. The Plan has access 

to the Training Facility via a public 

road. The subject property is a 40,471 

square foot land site, zoned I1–Light 

Industrial and fronting on a medium 

volume road. The subject property has 

a 30-year old 3,200 square foot steel 

frame building on site. The Training 

Facility is a new recently constructed 

and completed building, consisting of a 

two story steel frame structure, with 

4,800 square feet per floor, for a total of 

9,600 square feet. The first floor will be 

shop/warehouse type space; the second 

floor will be partially finished with 

classroom and office space that will be 

used as a training center. 

The Plan intends to demolish the 30- 

year old 3,200 square foot building in 

the near future. The Trustees 

determined that the old structure could 

not be renovated or adapted to serve the 

Plan’s training needs. According to the 

applicant, the old structure is at the end 

of its useful life, and the usable space 

is too small to accommodate the number 

of apprentices and journeymen who will 

be using the Training Facility. There 

will be 39 parking spaces on the subject 

property which will be adequate to 

satisfy the needs of the Plan. 

Axpproximately 15 to 20 apprentices 

and 2 instructors will be using the 

facility at any one time. Though the 

project is planned as a training center, 

the Training Facility’s layout could be 

easily converted to a number of 

alternative light industrial uses. 

3. According to the submission dated 

September 13, 2005, by the counsel to 

the Plan, the actual and final cost of 

construction, which includes contract 

change orders, architectural and 

attorney fees, is $1,755,000. The Plan 

had a process in place to protect itself 

Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Notices 66857 

3The provision of services to a plan by a party 

in interest with respect to the plan is a separate 

prohibited transaction under section 406(a)(1)(C) of 

the Act. However, the provision of services to a 

plan by a party in interest, which are necessary for 

the operation of the plan, are statutorily exempt 

under section 408(b)(2) of the Act, if the conditions 

required therein are met. The Department is 

expressing no opinion, and is providing no relief 

beyond that provided by section 408(b)(2) of the 

Act, for the provision of such services by a 

subcontractor, who is a contributing employer to 

the Plan. The regulation promulgated by the 

Department which defines the scope of the statutory 

exemption contained in section 408(b)(2) of the Act 

also states that no relief is provided for any 

arrangement for services which would violate 

section 406(b) of the Act (see 29 CFR section 

2550.408b–2). Interested persons should review 

DOL Adv. Op. 99–09A (May 21, 1999) for a 

discussion of these issues. 

from cost over-runs. Cost over-runs 

incurred during the project for 

unforeseen building code enforcement 

were analyzed by the Plan’s Building 

Committee (the Committee) for proper 

interpretation of the building codes, 

discussion of alternatives, and then a 

vote by the Committee for the change 

order directive. The Plan had some 

construction change directives that were 

not foreseen at the time of the 

construction bid. The total cost of the 

construction change directives was 

$76,953.14, which according to the 

Plan’s counsel is well within the usual 

range for similar types of construction 

contracts. 

4. One of the subcontractors who 

worked on the Training Facility is a 

contributing employer to the Plan and 

was selected by the general contractor, 

who is not a party in interest, based on 

competitive bids.3 Furthermore, Local 

No. 367 did not lease space in the old 

facility and will not lease space in the 

new facility. 

5. The original structure (i.e., the old 

facility) was built in 1971 by the Plan 

for $38,405. The land, on which the old 

facility was constructed, was owned by 

the local union and transferred to the 

Plan in 1970 (prior to the enactment of 

ERISA). In July 2001, the Plan 

purchased two additional adjoining lots 

for $92,318. The Plan is exempt from 

paying State property taxes. 

6. The Appraisal of the Training 

Facility was conducted by Mr. Stanley 

D. Dunagan of Affiliated Appraisers of 

Alaska (the Appraiser), and is dated 

March 22, 2004. The Appraiser has been 

a licensed General Real Estate Appraiser 

in the State of Alaska since September 

23, 1991. The Appraiser prepared his 

appraisal while the Training Facility 

was under construction. The Appraiser 

noted that the estimated replacement 

value for a new facility that combines 

warehouse storage space and office 

space would be approximately 

$981,000. The Appraiser also opined 

that the market value of the Training 

Facility, prospective upon completion, 

would be $1,000,000. The I/F will 

obtain a current written appraisal of the 

Training Facility as of the date of the 

transaction. The applicant represented 

that the Appraisal will be sent to the 

Department soon after its completion 

but in no event later than 90 days after 

the transaction is consummated. 

7. The I/F, described in section 10 of 

this summary of facts and 

representation, requested an analysis of 

the construction costs of the Training 

Facility. This analysis was prepared by 

Mel Morgan, Jr., who is a Member of the 

Appraisal Institute (MAI) and an 

employee of the I/F, and it is included 

in the I/F’s report. The I/F stated in its 

report that the Appraiser based his cost 

estimate on storage warehouse costs for 

the first floor and office costs for the 

second floor. The I/F further stated that 

it was more appropriate to use cost 

estimates based on a vocational school 

category because the occupancy’s 

emphasis is on trade and technical skills 

with a greater proportion of shops and 

laboratories. 

Therefore, based in part on statistical 

information, the I/F concluded that 

regardless of quality considerations, the 

vocational school costs demonstrate that 

the Appraiser’s cost estimates were low, 

and the contractor’s costs were within a 

reasonable range. The I/F believes that 

the $1,000,000 fair market value for the 

Training Facility is a reasonable and 

very conservative value for the project 

due to recent rising valuations in the 

local real estate market. The I/F also 

stated that the higher actual costs for 

construction (compared to the 

Appraiser’s estimated replacement 

value) reflect specialized tenant 

improvements (i.e., specialized 

equipment, work stations and 

ventilation for various types of training 

involving medical and other gases, 

refrigeration systems and a variety of 

welding techniques and applications) in 

the building and a more accurate 

accounting of costs to build such a 

building. Because construction of the 

Training Facility is complete, the Plan 

has no plans for any additional 

construction and no plans to incur 

additional construction costs. 

8. The Loan amount is $750,000. The 

Loan is a non-recourse loan amortized 

over 15 years (180 monthly payments), 

at the Prime Rate as published in the 

Wall Street Journal under the section of 

‘‘Interest Rates and Bonds.’’ The Plan’s 

annual obligation on the Loan totals 

$77,168.06, which includes principal 

and interest (the monthly payment is 

$6,430.67). According to the I/F’s report, 

the current annual market rental rate for 

leasing a facility similar to the Training 

Facility, taking into account information 

from the Appraiser’s report, would be 

approximately $109,440. According to a 

report submitted to the I/F by Mr. 

Morgan, the Appraiser’s estimate of 

market rent was based on the 

assumption that the owner would not be 

able to find a tenant who would pay for 

the improvements to the building. 

According to Mr. Morgan, basing market 

rent on this scenario results in a more 

conservative estimate of income and 

value than basing market rent for a 

‘‘build-to-suit’’ tenant. The I/F also 

concluded that, with a 45-year 

estimated economic life for the Training 

Facility, the cost of ownership is 

significantly better than would be the 

cost of renting such a facility. 

Furthermore, there are no prepayment 

penalties, so the Loan may be pre-paid 

at anytime. The lender’s only recourse, 

in the case of default, is the Training 

Facility. All closing costs will be paid 

by the Plan, and are estimated at $30. 

9. The I/F also has represented that 

the Plan currently has adequate excess 

cash-flow to service the annual loan 

payment of $77,186.06. The Plan’s 

income exceeded its expenses by 

$193,780 in 2002, $323,919 in 2003 and 

$367,439 in 2004. Although, the Plan’s 

income from January through July, 2005 

was 6% less than its income for the 

same period in 2004, the Trustees 

expect to have a total income of 

$801,064 for 2005. The Plan’s expenses 

after completion of the Training Facility 

are expected to be approximately the 

same as 2004, $484,757. The Plan 

expects to have a net operating income 

of $259,139 even with the additional 

$77,168 per year in payments to service 

the Loan. Therefore, the I/F stated that 

the Plan has adequate and available 

liquid net worth to service the Loan 

without creating hardship to the Plan. 

10. Washington Capital Management, 

Inc. (i.e. the I/F) confirms that it is an 

independent third party fiduciary and 

Qualified Professional Asset Manager 

(‘‘QPAM’’), as defined in PTE 84–14 (49 

FR 9494, 9506, March 13, 1984). The 

I/F has been hired as an independent 

fiduciary to evaluate the Loan 

provisions and its prudence. The I/F 

confirms that: (i) It is a registered 

investment adviser under the 

Investment Advisers Act of 1940; (ii) It 

has total client assets in excess of $50.0 

million under its management and 

control; and (iii) The firm has 

shareholders’ equity in excess of 

$750,000. 

The I/F has been providing private 

pension funds with investment 

management services in real estate 

lending since 1988 and in real estate 

66858 Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Notices 

equity investing since 1995. It currently 

manages mortgage portfolios with 

aggregate assets in excess of $700 

million and equity real estate 

investment portfolios with aggregate 

assets in excess of $550 million. The 

I/F currently manages and monitors 

approximately 50 real estate loans and 

36 real estate equity type investments. 

The I/F and its professionals have 

experience in underwriting, closing, and 

monitoring diversified classes of 

investments. 

Its real estate division has fifteen 

professionals, the majority of whom 

have over 20 years of real estate lending 

and investing experience. This 

assignment is managed by Cory A. 

Carlson, Director of Equity Real Estate, 

who has over 25 years of real estate 

underwriting experience. Additional 

review and underwriting expertise was 

provided by Jan Sieberts, Senior Loan 

Officer and Anchorage Area Manager, 

with over 30 years of Real Estate 

Lending experience in Anchorage, 

Alaska. The I/F estimates gross annual 

revenues for 2005 to be approximately 

$12 million. Its fees, for this transaction, 

are estimated to be 0.0002% of its 2005 

revenues. 

11. The I/F represents that it has been 

advised of it duties and obligations 

under Title I of ERISA as an 

independent fiduciary. The I/F 

acknowledges its understanding of Title 

I of ERISA, and accepts the duties and 

obligations as an independent fiduciary; 

Furthermore, the I/F understands and 

accepts the potential liability of the 

independent fiduciary role. The I/F 

represents that it will exercise whatever 

actions are reasonable and necessary to 

safeguard the interests of the Plan and 

its participants and beneficiaries. The 

I/F will protect the rights of the Plan 

with respect to the Loan. In this 

transaction, the I/F’s role is limited to 

evaluating the risks, benefits and terms 

of the Loan, and confirming that the 

Loan is funded in accordance with 

terms disclosed in the application. 

Upon funding of the Loan, the I/F’s task 

will be completed. Once the Loan is 

funded, the Plan’s legal counsel will 

advise the Plan in regards to the 

operation and enforcement of the Loan, 

as may be necessary. 

The I/F represents that it toured the 

Training Facility, reviewed the 

Appraisal, read each of the proposed 

loan documents, evaluated the Plan’s 

financial statements, and interviewed its 

legal counsel and project manager. 

According to the I/F, all of the terms of 

the Loan are prudent, reasonable and 

consistent with market standards; 

Furthermore, the I/F states the Loan is 

in the best interest of the Plan. The 

I/F also certified that it has no preexisting relationship with Local 367 or 

the Plan, and based upon the 

information provided by the Plan, to the 

best of its knowledge, it is not a party 

in interest with respect to the Plan. 

Upon the publication of this exemption 

in the Federal Register, the I/F will 

confirm that the Loan has been funded 

in accordance with the terms set forth 

in the application. 

12. The employer contributions to the 

Plan required by the current collective 

bargaining agreement have increased 

from $1.15 per hour to $1.25 per hour 

effective July 1, 2004 and to $1.35 per 

hour effective July 1, 2005. Even though 

the current collective bargaining 

agreement expires on June 30, 2006, 

Trustees of the Plan, who also represent 

the bargaining parties, anticipate that 

future collective bargaining agreements 

will continue to provide sufficient funds 

to meet the training needs of the Plan, 

including the financing of the new 

facility. 

13. In summary, it is represented that 

the transaction will satisfy the statutory 

requirements for an exemption under 

section 408(a) of the Act because: 

(a) The Plan will not pay any 

commissions, fees or other expenses 

with respect to this transaction, except 

certain specified third party closing 

costs; 

(b) The I/F, after analyzing the 

relevant terms of the Loan, will 

determine whether such Loan is in the 

best interest of the Plan and its 

participants and beneficiaries; 

(c) In determining the fair market 

value of the Training Facility, the I/F 

will obtain a current written Appraisal 

report from an independent qualified 

appraiser at the time of the transaction, 

and will ensure that such Appraisal is 

consistent with sound principles of 

valuation; 

(d) The Loan will be for the duration 

of 15 years at the Prime Rate as listed 

in the Wall Street Journal; 

(e) Under the terms of the Loan 

agreement, the Loan will be secured by 

the Training Facility and in the event of 

default by the Plan, Local No. 367 will 

have recourse only against such facility 

and not against the general assets of the 

Plan; 

(f) The terms and conditions of the 

Loan will be at least as favorable to the 

Plan as those which the Plan could have 

obtained in an arm’s length transaction 

with an unrelated third party; and 

(g) The Loan will be repaid by the 

Plan with the funds the Plan retains 

after paying all of its operational 

expenses. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Arjumand A. Ansari of the Department 

at (202) 693–8566. (This is not a toll-free 

number.) 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under section 

408(a) of the Act and/or section 

4975(c)(2) of the Code does not relieve 

a fiduciary or other party in interest or 

disqualified person from certain other 

provisions of the Act and/or the Code, 

including any prohibited transaction 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of section 404 

of the Act, which, among other things, 

require a fiduciary to discharge his 

duties respecting the plan solely in the 

interest of the participants and 

beneficiaries of the plan and in a 

prudent fashion in accordance with 

section 404(a)(1)(b) of the Act; nor does 

it affect the requirement of section 

401(a) of the Code that the plan must 

operate for the exclusive benefit of the 

employees of the employer maintaining 

the plan and their beneficiaries; 

(2) Before an exemption may be 

granted under section 408(a) of the Act 

and/or section 4975(c)(2) of the Code, 

the Department must find that the 

exemption is administratively feasible, 

in the interests of the plan and of its 

participants and beneficiaries, and 

protective of the rights of participants 

and beneficiaries of the plan; 

(3) The proposed exemptions, if 

granted, will be supplemental to, and 

not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transitional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction; and 

(4) The proposed exemptions, if 

granted, will be subject to the express 

condition that the material facts and 

representations contained in each 

application are true and complete, and 

that each application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 31st day of 

October, 2005. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 05–21964 Filed 11–2–05; 8:45 am] 

BILLING CODE 4510–29–P